News / Asia

    Asian Markets Mixed After Surprise China Interest Rate Increase

    Chinese investors monitor their stock prices at a security firm in Hefei, east China's Anhui province, 14 Oct. 2010
    Chinese investors monitor their stock prices at a security firm in Hefei, east China's Anhui province, 14 Oct. 2010

    Multimedia

    Audio
    Heda Bayron

    Stocks in Hong Kong and Japan fell and the U.S. dollar rose a day after China raised interest rates for the first time since December 2007.  Economists interpret the move as a sign that authorities are taking a more aggressive stance against inflation and bank lending.

    Chinese borrowers will now have to pay at least 0.25 percentage points more interest on their loans. China's central bank increased the cost of borrowing late Tuesday, ahead of releasing inflation figures for September.

    Higher inflation rate

    Market analysts expect the inflation rate to be higher than the 3.5 percent recorded in August – already the fastest pace in nearly two years. They think China hopes higher rates will cool price increases.

    Jan Lambregts, global head of financial markets research at Rabobank, says the central bank is also trying to slow lending.

    "Chinese policy makers are very unhappy about bank lending and they want to curb that more…. It's really a warning shot, to those banks – 'curb your bank lending, we're serious,'" Lambregts said.

    Credit boom

    For the first nine months of the year, bank lending reached $948 billion – just 19 percent shy of the government's target for the year. The credit boom has sparked a surge in property prices nationwide.

    Last week, the central bank asked six major banks to raise the ratio of deposits they hold as reserves, which reduces the amount available for lending.

    With the increase, the one-year lending rate now stands at 5.56 percent, while the deposit rate climbs to 2.5 percent. China had not moved its interest rates in nearly three years.

    On Wednesday, stock prices in Hong Kong declined just under 1 percent, led by property companies. Japan's Nikkei index fell by 1.6 percent. But Shanghai managed to claw back losses earlier in the day. And in Seoul and Taipei, main stock indexes closed higher.

    Investment money

    A flow of investment money from developed economies seeking higher returns could complicate China's efforts to slow its economy. The problem could worsen if the U.S. Federal Reserve increases the amount of money in circulation in the coming weeks to stimulate the American economy.

    Strong foreign investment flows may boost China's currency. A stronger yuan would make imported commodities cheaper, helping manage inflation. Lambregts says expectations of more rate increases could have an influence on the exchange rate.

    "I think we should take a broader view, that in terms of hot money inflow, any prospect of further tightening on the monetary front only increases the feeling that you should be in China," he added.

    The yuan's exchange rate is tightly managed by the central bank, although it has risen 2.5 percent against the dollar since June. But on Wednesday, the dollar recorded its biggest gain against the yuan since June, after the Chinese central bank sharply lowered the reference rate for yuan movements.

    You May Like

    Video Rubio Looks to Surge in New Hampshire

    Republican presidential candidate has moved into second place in several recent surveys and appears to be gaining ground on longtime frontrunner Donald Trump

    UN Calls for Global Ban on Female Genital Mutilation

    Recent UNICEF report finds at least 200 million girls and women alive today have undergone female genital mutilation in 30 countries

    UN Pilots New Peace Approach in CAR

    Approach launched in northern town of Kaga Bandoro, where former combatants of mainly Muslim Seleka armed group and Christian and animist anti-Balaka movement are being paid to do community work

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    German Artists to Memorialize Refugees With Life Jacket Exhibiti
    X
    Hamada Elsaram
    February 05, 2016 4:30 PM
    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video German Artists to Memorialize Refugees With Life Jacket Exhibit

    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video E-readers Help Ease Africa's Book Shortage

    Millions of people in Africa can't read, and there's a chronic shortage of books. A non-profit organization called Worldreader is trying to help change all that one e-reader at a time. VOA’s Deborah Block tells us about a girls' school in Nairobi, Kenya where Worldreader is making a difference.
    Video

    Video Genius Lets World Share Its Knowledge

    Inspired by crowdsourcing companies like Wikipedia, Genius allows anyone to edit anything on the web, using its web annotation tool
    Video

    Video Former Drug CEO Martin Shkreli Angers US Lawmakers

    A former U.S. pharmaceutical business executive has angered lawmakers by refusing to explain why he raised the price of a life-saving pill by 5,000 percent. Martin Shkreli was removed from a congressional hearing on Thursday after citing his Fifth Amendment right to stay silent. Zlatica Hoke has more.
    Video

    Video Super Bowl TV Commercials are Super Business for Advertisers

    The Super Bowl, the championship clash between the two top teams in American Football, is the most-watched sporting event of the year, and advertisers are lining up and paying big bucks to get their commercials on the air. In fact, the TV commercials during the Super Bowl have become one of the most anticipated and popular features of the event. VOA's Brian Allen has a sneak peek of what you can expect to see when the big game goes to commercial break, and the real entertainment begins.
    Video

    Video In Philippines, Mixed Feelings About Greater US Military Presence

    In the Philippines, some who will be directly affected by a recent Supreme Court decision clearing the way for more United States troop visits are having mixed reactions.  The increased rotations come at a time when the Philippines is trying to build up its military in the face of growing maritime assertiveness from China.  From Bahile, Palawan on the coast of the South China Sea, Simone Orendain has this story.
    Video

    Video Microcephaly's Connection to Zika: Guilty Until Proven Innocent

    The Zika virus rarely causes problems for the people who get it, but it seems to be having a devastating impact on babies whose mothers are infected with Zika. VOA's Carol Pearson has more.
    Video

    Video Solar Innovation Provides Cheap, Clean Energy to Kenya Residents

    In Kenya, a company called M-Kopa Solar is providing clean energy to more than 300,000 homes across East Africa by allowing customers to "pay-as-you-go" via their cell phones. As Lenny Ruvaga reports from Kangemi, customers pay a small deposit for a solar unit and then pay less than a dollar a day to get clean energy to light up their homes or businesses.
    Video

    Video Stunning Artworks Attract Record Crowds, Thanks to Social Media

    A new exhibit at the oldest art museum in America is shattering attendance records. Thousands of visitors are lining up to see nine giant works of art that have gotten a much-deserved shot of viral marketing. The 150-year-old Smithsonian American Art Museum has never had a response quite like this. VOA's Julie Taboh reports.
    Video

    Video Apprenticeships Put Americans on Path Back to Work

    Trying to get more people into the U.S. workforce, the Obama administration last year announced $175 million in grants towards apprenticeship programs. VOA White House correspondent Aru Pande went inside one training center outside of Washington that has gained national recognition for helping put people on the path to employment.
    Video

    Video New Material May Reduce Concussion Effects

    As the 2016 National Football League season reaches its summit at the Super Bowl this coming Sunday (2/7), scientists are trying to learn how to more effectively protect football players from dangerous and damaging concussions. Researchers at Cardiff and Cambridge Universities say their origami-based material may solve the problem. VOA’s George Putic reports.
    Video

    Video Saudi Arabian Women's Sports Chip Away at Stereotypes

    Saudi Arabian female athletes say that sports are on the front line of busting traditions that quash women’s voices, both locally and internationally. In their hometown of Jeddah, a group of basketball players say that by connecting sports to health issues, they are encouraging women and girls to get out of their homes and participate in public life. VOA’s Heather Murdock reports.
    Video

    Video A Year Later, Fortunes Mixed for Syrians Forging New Lives in Berlin

    In April of last year, VOA followed the progress of six young Syrian refugees -- four brothers and their two friends -- as they made their way from Libya to Italy by boat, and eventually to Germany. Reporter Henry Ridgwell caught up with the refugees again in Berlin, as they struggle to forge new lives amid the turmoil of Europe's refugee crisis.
    Video

    Video Zika Virus May be Hard to Stop

    With the Zika virus spreading rapidly, the World Health Organization Monday declared Zika a global health emergency. As Alberto Pimienta reports, for many governments and experts, the worst is yet to come.