China will maintain its steady monetary policy and there are no
plans to cut interest rates for Renminbi deposits in the near
future. This is the message from a senior official with the central
bank.
No Interest Rate Cut Next Year
Xie Ping is director-general of the Research Department of the .
He said that measures would first be finalized at the working
conference this month then sent on to the National People's
Congress for approval in March of next year.
He
expects public sector borrowing will continue to grow next year
reaching levels of say 1.5 trillion (US$180 billion) or 1.6
trillion yuan (US$190 billion). There will be a moderate increase
in monetary supply with narrow money (M1) up 15 percent and broad
money (M2) up 10 percent.
Xie emphasized that the current interest rate of 1.89 percent
should be viewed as a base line with no possibility of further
interest rate cuts. And the central bank's own rediscount rate
can't be adjusted in the short term, even if it seems high. He also
denounced any suggestion that China exports deflation to other
countries.
Direct Financing Ratio
This year enterprises have raised only a modest 5 percent of new
funds by direct financing through the stock market This is just
half of the highest ever figure of 10 percent and does not compare
favorably with last year's 8 percent. It reflects a securities
market, which is less vigorous than last year.
Xie suggests that wherever possible, enterprises should seek to
raise new finance directly through the capital market rather than
just taking on more debt by extending their borrowings from the
banks. In the first ten months of the current year enterprises
raised some 74 billion yuan (US$9 billion) on the stock market, 48
billion yuan (US$5.8 billion) less than the same period last year.
It shows that China's capital market still has quite some way to go
to catch up with international practice.
Saving Hit Record High
Personal savings are expected to reach 8.47 trillion yuan (US$1.02
trillion) this year, an increase of 1.2 trillion yuan (US$145
billion). Deposit accounts with instant access account for about 32
percent of the total and 41 percent of this increment. One-year
term deposits are also popular.
Xiu points to these huge funds on deposit as indicative of a
continuing reluctance to invest. Many ordinary people are content
to aim meantime for a short-term, risk-free return of about 2
percent.
A
listless stock market and falling consumer prices are contributing
factors. But most significant is an average figure for personal
wealth still below 10,000 yuan (US$1209). People just don't want to
take a chance with their savings.
(china.org.cn by Tang Fuchun December 12, 2002)