News / Asia

Three Questions: China Hikes Interest Rate

Three Questions: China Hikes Interest Rate
Three Questions: China Hikes Interest Rate
Les Carpenter

China raised its official loan interest rate by a quarter of a percent, hiking one-year lending rates to 5.56 percent and raising deposit rates from 2.25 percent to 2.5 percent.

Pieter Bottelier, Senior adjunct professor of China studies at Johns Hopkins University says China raised the interest rates to try to ward off some serious economic problems.  Those problems, he says, are much higher inflation than the government feels comfortable with and a property bubble of quite significant proportions and potentially dangerous for the economy.  He says the interest rate hike reflects a high level of concern about inflation and was an effort to bring an overheating economy down to earth.

Is the property bubble you mentioned as serious as believed, or is it just something that would self correct?

Oh! It is undoubtedly serious.  It's a major phenomenon, but it's not national.  It's essentially limited to the major cities on the east coast and a few tier one interior cities and Hainan Island.  The national averages do not show the bubble phenomenon.


The World Bank has now lowered its outlook for next year in China and across East Asia.  They are urging officials in the region to curb inflation and ward off those asset bubbles.  Do you think this was partly behind China's hiking interest rates at this time?


I think that's all part of it.  It's very complex, but the interest rate adjustment is, I think, clearly intended to help cool down the economy and achieve a soft landing.  The economy had been overheating since the second-half of 2009.  But, by itself, if will not accomplish that, that miracle.  There is, in my view, a high probability that China's economy will continue to grow fairly fast, but not at these terrible rates we have seen in recent years.  My expectation is that the growth rate, partly because of natural pressures, partly because the government, I think, wants to achieve it, will come down in the next several years to a more sustainable level of around 7 percent.


I take it then that you have come to the conclusion that the interest rate adjustment has more to do with internal affairs in China and that the currency exchange rate is not connected and is something that will just take time to settle?


The adjustment in interest rates is not going to do anything automatically for the exchange rate.  If they want to continue moving in the right direction and achieve greater independence for domestic monetary policy they will have to make the rate more flexible.  That's what they said they would do.  But, there's no immediate connection between the interest rate adjustment and the exchange rate.

You May Like

Koreas Mark 61st Anniversary of War Armistice

Muted observances on both sides of heavily-armed Demilitarized Zone that separates two decades-long enemies More

Judge Declares Washington DC Ban on Public Handguns Unconstitutional

Ruling overturns capital city's prohibition on carrying guns in pubic More

Pricey Hepatitis C Drug Draws Criticism

Activists are using the International AIDS Conference to criticize drug companies for charging high prices for life-saving therapies 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.
Students in Business for Themselvesi
X
Mike O'Sullivan
July 26, 2014 11:04 AM
They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Not Even Monks Spared From Thailand’s Junta-Backed Morality Push

With Thailand’s military government firmly in control after May’s bloodless coup, authorities are carrying out plans they say are aimed at restoring discipline, morality and patriotism to all Thais. The measures include a crackdown on illegal gambling, education reforms to promote students’ moral development, and a new 24-hour phone hotline for citizens to report misbehaving monks. Steve Sandford reports from Bangkok.
Video

Video Virtual Program Teaches Farming Skills

In a fast-changing world beset by unpredictable climate conditions, farmers cannot afford to ignore new technology. Researchers in Australia are developing an online virtual world program to share information about climate change and more sustainable farming techniques for sugar cane growers. As VOA's Zlatica Hoke reports, the idea is to create a wider support network for farmers.
Video

Video Airline Expert: Missile will Show Signature on Debris

The debris field from Malaysia Airlines Flight 17 is spread over a 21-kilometer radius in eastern Ukraine. It is expected to take investigators months to sort through the airplane pieces to learn about the missile that brought down the jetliner and who fired it. VOAs Carolyn Presutti explains how this work will be done.
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.

AppleAndroid