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 ZT China Addresses Concerns Over Yuan, Hot Economy. |
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作者：ceo/cfo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
By JAMES T. AREDDY
May 18, 2007 11:25 a.m.
SHANGHAI – China took steps to address concerns over its fast economic growth, frothy stock market and controversial currency policy, announcing an increase in interest rates and an adjustment to its exchange-rate mechanism.
The benchmark one-year lending rate will rise starting Saturday by 0.18 percentage point to 6.57%, the People's Bank of China said Friday. The rate on one-year fixed savings deposits will be lifted by 0.27 percentage point to 3.06%. The central bank also announced an increase in the portion of deposits that lenders must keep on reserve with it – the eighth time in less than a year that it has taken such a step, which is designed to curb lending.
Separately, the central bank said it would widen the range within which its currency, the yuan, can fluctuate in trading each day against the U.S. dollar. The daily band in which the yuan can move against the dollar will widen to plus or minus 0.5%, from plus or minus 0.3%, the bank said. The move, which theoretically could facilitate the yuan's appreciation, comes amid intense pressure to let the yuan's value rise more quickly from U.S. politicians – who argue the Chinese currency is undervalued, making Chinese goods unfairly inexpensive. The move also comes just days before a large delegation of top Chinese officials to Washington for bilateral economic talks.
The unusual decision to announce three significant new financial policies together reflects Beijing's struggle to address several of its thorniest economic challenges. The government has announced numerous measures in recent years to keep its economy – which has been growing faster than 10% a year – from spinning out of control. Soaring stock prices since mid-2005, meanwhile, have begun to create concerns that a bubble is forming that could soon pop, with painful results.
And the relatively low value of China's currency, in addition to being the source of intensifying trade friction with the U.S., is helping create massive trade surpluses for China that are flooding the economy with cash – part of the reason for both the red-hot economy and the surging stock market.
Economists said the moves could have the collective impact of slowing growth in credit and investment. The effect could be particularly significant for China's stock market, although officially the central bank made no mention of the share values in its brief statement. Coming on the heels of an increase in interest rates in March, the new hike represents the quickest back-to-back tightening of official interest rates since at least 1993. The central bank explained in a statement that it aims to "enhance the liquidity management of banking system, leading the reasonable growth of currency credit and investment, and maintaining the basic stability of price level."
Some analysts gave Beijing credit for making good on repeated pledges to make its economy more market-oriented as it strives to sidestep economic overheating and other financial system risks. Goldman Sachs & Co. economist Hong Liang, who has been critical of past steps taken by the government, said in a note Friday that the combined measures are a "more credible signal of the central bank's resolve to keep inflation in check."
The wider trading band for the yuan, however, is largely symbolic -- it opens the door for more daily currency movement that could lead to a stronger yuan, but falls far short of guaranteeing that outcome. That is because the yuan already trades on most days well within its existing trading band. The Chinese currency has risen about 7% against the dollar since the government abandoned a de facto peg to the U.S. currency in July 2005.
The adjustment comes less than a week before U.S. Treasury Secretary Henry Paulson sits down with the Chinese delegation to reiterate Bush administration and congressional desires for China to let the yuan become more flexible. Washington argues a stronger yuan would make Chinese exports more expensive and slow the build up of its trade surplus and accumulation of foreign-exchange reserves.
David Loevinger, the U.S. Treasury's Beijing representative, said earlier in the week in Shanghai that China needs more than a stronger yuan. He said it also should tighten credit to address "large and rising" imbalances in the country's economy He said Chinese officials consider rising interest rates as risky. They worry, he said, the country's domestic companies will switch their bank deposits into yuan from U.S. dollars, unlocking a fresh source of demand for the yuan. "They are very concerned with another wall of money coming in," Mr. Loevinger said.
作者：ceo/cfo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 ZT China Addresses Concerns Over Yuan, Hot Economy. -- ceo/cfo - (4754 Byte) 2007-5-19 周六, 00:57 (1205 reads)
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