China raises bank lending rate to slow investment
(chinadaily.com.cn)
Updated: 2006-04-28 09:26 While the central bank rate increase is intended to discourage lending in
general, the government has also taken more targeted measures in sectors where
growth appears to be outstripping demand. Investment controls have already been
imposed on the aluminum, ferrous alloy, coke and cement industries. The auto industry will be next, He Yanli, a vice-director at the National
Development and Reform Commission, told Dow Jones Newswires Thursday.
Car sales in the first three months this year rose 74 per cent from the
same period a year earlier to 890,000 units, according to data from the China
Association of Automobile Manufacturers.
International
Reaction
The US Treasury Department welcomed the move as a sign
Beijing was being flexible in its management of the giant economy.
"It's another example of the Chinese using market instruments to deal with
market conditions in their economy," Treasury spokesman Tony Fratto told
reporters. "From that perspective, it's positive.Ħħ
Federal Reserve Chairman Ben Bernanke said that allowing the yuan to move
more freely would give Beijing even more independence in setting monetary
policy.
"It's a very large country, they need to have an independent monetary policy.
They can't really run independent monetary policy without a flexible exchange
rate," he said.
Lorenzo Bini Smaghi, the European Central Bank board member responsible for
international relations, called the Chinese move a step in the right direction.
Asked in Florence, Italy, if more hikes were needed, he replied: "Yes, and
they'll do it."
"It's a positive step in so far as it should help take some of the steam out
of investment demand. It also signals a proactive central bank," said Ben
Simpfendorfer, a strategist with Royal Bank of Scotland in Hong Kong, in an
interview with the Reuters.
The Chinese authorities have been trying for the past
year to rebalance high economic growth rates away from investment and more into
domestic consumption -- a shift that could help rein in the soaring trade
surplus by lifting imports, analysts said.
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