CHINA / National
Economist: Another interest rate hike is necessary
(Xinhua)
Updated: 2006-08-16 17:14
BEIJING -- A well-known Chinese economist called for another interest
rate hike as the economy steamed ahead at the fastest pace in a decade in
the second quarter of the year despite a series of austerity measures.
"First-half economic expansion showed the last interest rate increase was
too small," Zhang Shuguang, a macroeconomics professor at Beijing Tianze
Economic Research Institute, told Xinhua.
China announced at the end of April a 0.27 percentage point hike in the
benchmark one-year loan interest rate to raise the borrowing cost as part
of its effort to curb an investment binge and prevent economic
overheating.
Regulators have also tightened bank credit by other means and imposed
curbs on real estate investment in an effort to rein in excessive
spending.
But official figures showed the investment-driven economy still surged
10.9 percent in the first six months, with a growth of 11.3 percent in
the second quarter, the fastest in a decade.
The central bank has left the deposit rate unchanged at a time when
Chinese residents have been putting too much of their money into banks.
That is in line with the government's hope that consumer spending should
contribute more to economic growth.
Zhang called the decision "improper", arguing that Chinese banks are
already better off, enjoying a much bigger difference -- exceeding three
percentage points -- between the loan and deposit rates than their
foreign peers.
With funds available for lending, domestic banks would be prompted
instead to boost loans in pursuit of profits as the rate difference would
widen, he said.
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