|
|
 |
China Increases Interest Rate
Chinese officials have made another move to liberalize the national currency, announcing a hike in interest rates, the fourth in the past year. Not all experts say, though, that the revaluation of the yuan will benefit the world economy.
The People’s Bank of China has increased the one-year lending rate by 0.18 percent to 3.06 percent, while the one-year deposit rate is rising by 0.27 percent to 6.57 percent. China has also ordered banks to put aside more money in reserve. Bank’s reserve requirements have been raised by 0.5 percent to 11.5 percent.
In a separate move, Chinese authorities have widened the yuan’s trading limit against the U.S. dollar, from 0.3 percent to 0.5 percent per day. This has been the second major step to liberalize the yuan since 2005 when Beijing raise the yuan’s exchange rate against the dollar from 8.2765 yuan/$1 to 8.11 yuan/$1.
The value of the yuan has cause major friction with the United States and Europe where politicians argue it has been kept artificially low. The countries are even threatening with sanctions if China does not keep the rate unchanged.
U.S. financial officials have welcomed the decision, pressing for further steps to make the yuan more flexible.
Bank of England governor Mervyn King is, however, skeptical of the move, saying that inflation rates worldwide are low due to cheap Chinese imports, which helps national banking authorities to keep interest rates high. As the yuan gets stronger, other countries will have to stiffen their monetary polices, damaging economic growth.
www.kommersant.com
All the Article in Russian as of May 22, 2007
|
|
|
