Central bank says pressure for higher rates 'has eased'
Source: Shanghai Daily Date: 2006-11-22
China's central bank Governor Zhou Xiaochuan said yesterday pressure for higher interest rates "has eased a bit" amid signs investment and industrial production growth is slowing.
"This decline in growth" in investment "is a good thing," Zhou said in an interview in Sydney, where he's attending a meeting of central bankers from the Group of 10 industrialized nations. "We still must keep an eye on inflation. But the pressure has eased a bit" on interest rates, Bloomberg News said.
Zhou's comments suggest concerns have waned that the pace of investment will result in idle factories and empty apartments in the world's fastest-growing major economy. China's growth slowed in the third quarter for the first time in a year as lending curbs that included two interest rate increases this year took effect.
"The economy is starting to slow because of the measures the government has put in place," said Amy Auster, a senior economist at Australia & New Zealand Banking Group Ltd, in an interview from Singapore.
The yuan gained 0.02 percent to 7.8708 against the US currency as of 5:07 pm yesterday in Shanghai, according to data compiled by Bloomberg. The currency has advanced 5.1 percent since China ended a decade-old peg to the US dollar in July 2005, including a 2.1 percent one-off revaluation.
Spending on factories, real estate and other fixed assets grew at a slower pace in October and China's industrial output climbed at the weakest pace in almost two years.
Inflation has also eased. The consumer price index advanced 1.4 percent in October from a year earlier after rising 1.5 percent in September.
The People's Bank of China raised lending rates on August 18 for the second time in four months to slow bank lending and bring investments under control. On November 3 it ordered commercial lenders to set aside more money as reserves for the third time this year.
In the second quarter, the economy "was overheating, but now it has already slowed down," Zhou said. "It's already slowed into a reasonable range.
