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

Multimedia Obama, Modi Break Nuclear Deal Deadlock

Impasse over liability issues had been stalling bilateral civilian nuclear cooperation; deal reached at start of US president's three-day visit to India More

WHO's Late Efforts in Tackling Ebola Highlight Need for Reform

Health experts debate measures to reform agency’s response to global public health emergencies in special one-day session on deadly outbreak More

One Tumultuous Year in Power for CAR's President

As sectarian violence raged across Central African Republic, interim President Catherine Samba-Panza has Herculean task: to end civil war and put country back on right track More

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.
Worldwide Photo Workshops Empower Youthi
X
Julie Taboh
January 23, 2015 11:08 PM
Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.
Video

Video S. Korean Businesses Want to End Trade Restrictions With North

Business leaders in South Korea are calling for President Park Geun-hye to ease trade restrictions with North Korea that were put in place in 2010 after the sinking of a South Korean warship.Pro-business groups argue that expanding trade and investment is not only good for business, it is also good for long-term regional peace and security. VOA’s Brian Padden reports.
Video

Video US Marching Bands Grow Into a Show of Their Own

The 2014 Super Bowl halftime show was the most-watched in history - attracting an estimated 115 million viewers. That event featured pop star Bruno Mars. But the halftime show tradition started with marching bands, which still dominate the entertainment at U.S. high school and college American football games. But as Enming Liu reports in this story narrated by Adrianna Zhang, marching bands have grown into a show of their own.
Video

Video Secular, Religious Kurds Face Off in Southeast Turkey

Turkey’s predominantly Kurdish southeast has been rocked by violence between religious and secular Kurds. Dorian Jones reports on the reasons behind the stand-off from the region's main city of Diyarbakir, which suffered the bloodiest fighting.
Video

Video Kenya: Misuse of Antibiotics Leading to Resistance by Immune System

In Kenya, the rise of drug resistant bacteria could reverse the gains made by medical science over diseases that were once treatable. Kenyans could be at risk of fatalities as a result if the power in antibiotics is not preserved. Lenny Ruvaga has more on the story from Nairobi.
Video

Video Solar-Powered Plane Getting Ready to Circumnavigate Globe

Pilots of the solar plane that already set records flying without a drop of fuel are close to making their first attempt to fly the craft around the globe. They plan to do it in 25 flying days over a five month period. VOA’s George Putic reports.
Video

Video How Experts Decide Ethiopia Has the Best Coffee

Ethiopia’s coffee has been ranked as the best in the world by an international group of coffee connoisseurs. Not surprisingly, coffee is a top export for the country. But at home it is a source of pride. Marthe van der Wolf in Addis Ababa decided to find out what makes the bean and brew so special and how experts make their determinations.
Video

Video Yazidi Refugees at Center of Political Fight Between Turkey, Kurds

The treatment of thousands of Yazidis refugees who fled to Turkey to escape attacks by Islamic State militants has become the center of a dispute between the Turkish government and the country's pro-Kurdish movement. VOA's Dorian Jones reports.
Video

Video World’s Richest 1% Forecast to Own More Than Half of Global Wealth

The combined wealth of the world's richest 1 percent will overtake that of the remaining 99 percent at some point in 2016, according to the anti-poverty charity Oxfam. Campaigners are demanding that policymakers take action to address the widening gap between the ‘haves’ and the ‘have nots’, as Henry Ridgwell reports for VOA from London.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid