Possibility for interest rate rise unlikely in near future, experts say

The financial operation data of June and of the first half year released by the People's Bank of China recently shows that despite a slowdown in credit growth pace, the overall increase still over-swells. At the same time, the foreign exchange (forex) reserve hit US$941.1 at the end of June, an increase of 32.37 per cent year on year.

Nearly 90 percent of yearly credit quotas for the year already finished

The data released by the Central Bank issued show that by the end of June the credit balance in a broader sense (M2) is 32.28 trillion yuan, an increase of 18.43 per cent year on year, and that in a narrower sense (M1) is 11.23 trillion yuan, an increase of 13.94 per cent. In the first half year the remaining RMB loan volume of all items with all financial institutions stood at 21.53 trillion yuan, a rise of 15.24 per cent year-on-year. And the volume of RMB loans had risen by 2.18 trillion yuan, an increase of 723.3 billion yuan year on year, contributing to 87 per cent of the newly added loan quotas all the year round.

Forex reserve reaches 941.1 billion US dollars

China had, by the end of June, achieved a forex reserve of 941.115 billion US dollars, and remains the first place among the countries with most forex reserves, followed by Japan with 864.88 billion US dollars of forex reserves at present. China has exceeded Japan in this regard since the end of February this year.

Some insiders deem that the increased forex reserve indicates the strengthening of one country¡¯s national strength. In the perspective of economics, nevertheless, more forex reserve does not necessarily mean the better. At present, an increased forex reserve and trade surplus have brought some degrees of difficulties in exercising monetary policy. And to strike a basic balance of payment has become a priority of our current macro-policy.

Outstanding deposit volume of 31.85 trillion yuan

Data shows that the overall amount RMB deposits with the financial institutions had reached 31.85 trillion yuan by the end of June, an increase of 8.36 per cent year on year, with its increase range of 1.17 percentage points higher than in the same period of 2005. During the first half year alone, the deposits jumped by 3.23 trillion, an increase of 632.4 billion yuan.

Possibility for interest rate increase unlikely in near future

According to the data issued by the People¡¯s Bank of China, the over-fast growth of currency and credit is one of the major challenges for the country¡¯s macro-economy operation. At the end of June the bank savings had risen by 15.24 per cent over the same period of last year, with an increase range of 0.73 per cent lower than in May. Some experts of the Chinese Academy of Social Sciences acknowledged that the Central Bank has issued a range of macro-economic control measure this year, including increasing loan interest rate, issuing directional instruments, advancing legal deposit reserve fund rate, further opening the market and regulating instrument business, but without resorting to raising the interest rate. Hence, the possibility for increasing interest rate is unlikely in near future.

Experts estimate that simply considering from the aspect of monetary policy, to speed up the reform of RMB exchange rate would be the most effective policy instrument. But in the view of the possible policies the Chinese government to adopt, it is more likely to formulate the policy concerning interest rate and deposit reserve funds, along with a set of assembled policies.

By people's Daily Online