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Researcher says rate cut not impossible
(Shenzhen Daily/Agencies)
Updated: 2006-02-08 15:41 Researcher says rate cut not
impossible
It is "not impossible" for the government to cut its deposit rate even as it
pushes for more interest rate liberalization, said a researcher affiliated with
one of the country's four largest State commercial banks.
Allowing for more market-oriented domestic interest rates will help
commercial banks and rural credit cooperatives respond more actively to market
risks, said Zhao Xinjie, a researcher with the Institute of Finance under the
Industrial and Commercial Bank of China.
Zhao, whose views were carried on the opinion page of the China Daily
yesterday, said market-oriented interest rates may have a strong impact on banks
after China expanded interbank bond transactions, so policymakers may not take
significant initiatives this year.
"Of course, it is not impossible that the central bank will cut the base
interest rate for bank savings," Zhao wrote.
Zhao argued risks remain in the economy going forward, but didn't elaborate
on the idea of a potential rate cut.
China hasn't touched its benchmark one-year lending and deposit rates since
late October 2004, when it raised both by 27 basis points as part of efforts to
rein in a galloping economy. That was the first increase in the interest paid on
savings since July 1993.
Since the government began a series of macroeconomic adjustments in mid-2003,
money supply and fixed-asset investment growth have stabilized at sustainable,
but still strong, levels.
Zhao appeared to have a more cautionary view on China's economy, which the
government worries may still be harmed by overcapacity and potential deflation.
In the open market, the People's Bank of China, the central bank, has been
draining money mainly through issuing bills, Zhao said in the article.
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