Bank of China Tries to Spur Economy With Fifth Rate Cut in Three Months
Bank of China Tries to Spur Economy With Fifth Rate Cut in Three Months
By Mike Caggeso
Associate Editor
Money Morning
The People’s Bank of China continued nipping away at its one-year lending rate, cutting off 0.27 percentage points to 5.31%, its fifth rate cut in three months.
China also lowered its deposit rate by the same amount and reduced the proportion of deposits lenders have to hold as reserves by 0.5 percentage points to 15.5%, Bloomberg reported. All rate cuts will take effect Tuesday.
China’s slow burn of its interest rates is a calculated response to falling numbers across its board: gross domestic product could fall as low as 5% next year, way down from the 11.7% growth in 2007; exports fell for the first time in seven years last month; imports and manufacturing numbers also fell.
Unemployment figures are getting ugly, too. So far, the global financial crisis has taken 4 million city jobs from migrant workers and pushed urban unemployment up to 9.4%, the Chinese Academy of Social Sciences estimated last week. The result is rising gang violence and increased police measures and surveillances in cities hardest hit, Reuters reported.
China is also facing a dangerous decline in inflation, which limped at 2.4% annual pace in November, its fourth consecutive month-to-month drop and a sharp drop from the 4.0% posted in October, its National Statistics Bureau reported two weeks ago.
“The surprise is how small the move is,” Mark Williams, an economist with Capital Economics in London, told Bloomberg. “There’s been a sudden very rapid deterioration in all China’s economic data over the last 8 to 12 weeks.”
Last month, China cut interest rates by 1.08 percentage points, its biggest reduction in 11 years.
Also last month, China announced a massive 6 billion economic stimulus plan that will pump money into low-income housing, water and energy projects, airports, disaster relief and new railroads for the next two years.
“China understands that it’s gaining importance in the world economy and that it’s going to participate in that process,” said Keith Fitz-Gerald, Money Morning’s investment director and a former professional trade advisor who’s spent more than two decades focusing on investment opportunities in China, Japan and the rest of the Asia region.
“Many experts will see this as just a ‘bailout’ that’s directed at Chinese infrastructure projects, Chinese technology companies and at holding the global financial crisis at bay,” Fitz-Gerald said. “But the real message here is that Beijing is going to pull out all the stops to ensure that its economy does not falter. And that’s because China realizes that it’s become the super glue that’s holding the rest of the planet together.”
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Mike Caggeso is an Associate Editor at Money Morning
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Question by aawwianng: How to I transfer money from Canada to a Bank of China account in Hong Kong?
Does anyone know what the steps are to transfer money from Canada to a Bank of China account in Hong Kong? I don’t have a Bank of China account, but I think I could transfer money via my own bank account, or walk into the Bank of China branch in Canada and do the transfer? However, what is involved with this process? Service charge? How long does it take? How secure is it? If anyone has done it, and can share your knowledge and/or experience, that would be greatly appreciated! Thank you.
Best answer:
Answer by fun_fearless
The best thing you can do is to visit the bank (your bank where you have an account or the bank that you are going to send the money from). There, go to the custumer care officer and I am sure your questions above will be professionally, completely, clearly answered.
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Some concrete data is starting to emerge regarding the potential size of the problems that may be lurking on China's bank balance sheets - by ggnoc03 (ggnoc03 Noc)
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