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UPDATED: June-11-2012 China Cuts Bank Interest Rates to Stabilize Economy Chinese central bank's latest interest rates cut released a signalthat the government has attached greater importance to stabilizingeconomy, analysts said. The People's Bank of China announced the lowering of interest ratesby 25 basis points, effective on Friday. After the cut, the one-year deposit interest rate will fall to 3.25percent while the loan interest rate 6.31 percent. It marks the first time for China to cut the benchmark rates sinceDecember 2008, after which it has raised the rates five times todrain liquidity. "Given China's current economic situation and its policy shifttowards maintaining growth, the cut is well within expectations,"said Zhang Liqun, researcher from the Development Research Centerof the State Council, or China's cabinet. In a State Council meeting last month, Premier Wen Jiabao said thegovernment should "place maintaining growth in a more importantposition and carry out preemptive policy adjustments andfine-tuning more forcefully according to the changing situation." The announcement came two days ahead of the release of the economicdata, which indicated that inflation, the economy's major focus inthe past few years, would not remain the government's top agenda. According to the economic data published on Saturday, China'sinflation unexpectedly eased to a 23-month low due to falling foodprices and base effect. The consumer price index (CPI), a main gauge of inflation, slowedto 3.0 percent in May, the National Bureau of Statistics (NBS)said, from 3.4 percent in April and 3.6 percent in March. "The stabilization of price situation lifted worries for interestrates cut," noted Lian Ping, chief economist at the Bank ofCommunications, "The move is also an indispensable part of latestpolicies to increase the preset fine-tuning strength and to expanddemands." More monetary easing and futher stimulus expected In view of the recent economic growing trend, analysts believedthat the government would do more to spur slower-than-expectedgrowth in the world's second-largest economy. "The May economic data confirmed that China's growth has notbottomed out, as was evidenced by the sooner-than-expected interestcut," said Wang Jun, a researcher at the China Center forInternational Economic Exchanges. "The inflation pull-back has created more room for the governmentto pull policy levers to secure growth," Zhang Liqun stressed. Tang Yunfei, chief macroeconomic analyst at Founder Securities, sawthe cut is a signal of a new round of monetary loosening and heexpected an acceleration in credit supply for the latter half ofthe year. "Credit supply for the whole year will exceed 8.5trillion yuan," he predicted. China's gross domestic product (GDP) grew 8.1 percent in the firstquarter, the weakest pace in nearly three years, owing to wearyexports, domestic property market and its self-geared slowdown offixed-asset investment. Since the government's policy shift to shore up growth has becomeall the more necessary and the NDRC has ruled out the possibilityof launching a massive stimulus package featuring large-scaleinvestment projects, analysts expected that more monetary easingwill be implemented to put growth on track. Wang Yuwen, a researcher with Bank of Communications, expected nohefty interest rate cuts in the short-term, but did not rule outthe possibility of a mild reduction in interest rates in the thirdquarter if the global economic outlook worsens. Wang predicted that the central bank will cut the reserverequirement ratio by 50 points one to three times this year, a moveto spur lending and consumption. Meanwhile, besides more cuts to the bank reserve requirement ratioto boost credit supply, the government will also push forwardreforms in income distribution and structural tax reduction toboost spending, analysts said. "Our growth-stimulating policies should be forward-looking," Zhangsaid. (Xinhua News Agency June 11, 2012). The e-commerce company in China offers quality products such as Rear Mount Monitor , Industrial Touchscreen Monitor Manufacturer, and more. For more , please visit Lcd Display Screens today!
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