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

Obama: Alaskans Feel Signs of Climate Change

They're seeing bigger storm surges as sea ice melts, more wildfires, erosion of glaciers, shorelines More

1855 Slave Brochure Starkly Details Sale of Black Americans

Document lists entire families that were up for sale in New Orleans, offering graphic insight into the slavery trade More

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries 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.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs