China retains interest rates
(eastday.com)
Updated: 2004-04-18 08:41

China still has no immediate plans of an interest rate hike to cool down its largely investment-driven economic growth, said the country's chief monetary regulator on April 16.

"Though the consumer price index in China has grown rapidly since last September and the lending growth has expanded quickly, the most important thing for us now is to keep a stable monetary policy," said Zhou Xiaochuan, governor of the People's Bank of China (PBOC ), at a banking conference in Shanghai yesterday.

"It is too early to tell whether we need to adjust our interest rate," Zhou said.

The benchmark one-year lending rate stands at 5.31 percent and the interest rate of one-year deposits is 1.98 percent.

China reported that its economy grew by 9.7 percent in the first quarter, a quicker pace than the expected 9 percent.

"The fast economic growth was fueled by excessive investment and we are facing some inflation pressures," said Li Yong, vice minister of the Chinese Ministry of Finance, yesterday.

"Our first priority now is to further exploit domestic demand and revitalize old industrial bases," Li said.

The first three months of this year saw fixed-asset investment surge by 43 percent on China's mainland, according to the National Bureau of Statistics.

Instead of increasing interest rate, the central bank has taken other measures to cool the economic growth, including issuing central bank bills and raising deposit reserve requirement for lenders.

"These measures are very logical and we expect China's economy to continue to grow at a sustainable speed in the following years," said Stephan Newhouse, president of Morgan Stanley.

Meanwhile, Huang Ju, vice premier of China, said yesterday the country will give full support to the reforms of big-four state-owned commercial banks, which will be transformed into modern financial firms with sufficient capital, strict internal management and sound profitability.

Senior government officials said that its ongoing banking reform is "one battle that cannot lose." China is facing challenges to bail out its debt-ridden state-owned commercial banks.

Bank of China and China Construction Bank said yesterday that their restructuring programs are proceeding on track.

"We are currently in negotiations with some well-known international financial institutions on potential equity investment and to choose a right partner is difficult," Zhu Xinqiang, executive assistant president of the BOC, said.

The country's largest foreign exchange lender has sent invitation letters to many European and American banking and insurance institutions and large state-owned enterprises to seek strategic investors.

The BOC plans to bring its nonperforming loan ratio below 5 percent in three years, compared with some 14.84 percent at the end of last month.

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