Tuesday, 23 December 2008

China rates now down to 5.31%

Update on the interest rate in China.

In my opinion it has a lot further to go and the disappoint is expected. China is still learning and this gradual approach is fine for now. The millions of savers will be unhappy with every rate cut.

What is interesting is that the FT even get the phrase "social stability" into the journalist "key" first line. Otherwise this article is a good example of padding an article to make it longer than 1 line which was really all that was needed.

China cuts rates further to 5.31% [FT]

China cut interest rates for the fifth time in three months as the government tried to pump money into the economy to restore the high growth rates it considers crucial for social stability.

The benchmark one-year lending rate was cut on Monday by 27 basis points to 5.31 per cent, while the one-year deposit rate was lowered by the same amount to 2.25 per cent.

The People’s Bank of China, the central bank, also reduced the amount of money banks must hold in reserve by cutting the required reserve ratio by 50 basis points, a move that analysts say will release Rmb300bn ($43.8bn) for the banks to lend.

Faced with a much more severe slowdown than anticipated, China’s leaders have moved quickly in recent weeks to shore up crumbling growth, announcing a series of fiscal stimulus initiatives and infrastructure projects.

“Monetary policy is now all about freeing up funds to be lent into government-backed investment projects,” said Stephen Green, head of China research at Standard Chartered.

“For every Rmb1 of central and local government spending, Beijing is hoping for an additional Rmb1 from others and it is the banks that will be expected to provide that financing.”

The government has made employment for millions of recent university graduates and workers laid off from export-intensive industries its top priority and has ordered all levels of government and industry to take all necessary steps to “ensure 8 per cent growth” next year.

GDP growth fell from 11.9 per cent for the whole of last year to 9 per cent in the third quarter and more pessimistic forecasters, such as Royal Bank of Scotland, put growth at 5 per cent for the whole of next year.



~PakKaramu~ said...

Happy new year to you

xieuling said...

Happy 2009. Good job C.E.B. !