On July 20, the Central Bank of China raised interest rates
while the State Council simultaneously reduced interest tax rates
from 20 percent to 5 percent. Obviously these two measures are
aimed at getting the blistering economy onto a healthier footing.
But according to a July 23 story in Caijing Magazine, the
Shenzhen and Shanghai stock markets are no longer stalled. In fact
it is soaring, up 145 points, or 3.73 percent on the same day.
Obviously, the stock market has viewed these tightening measures as
good news for business.
The Caijing Magazine story also pointed out that the market,
which is now undergoing reforms, has not only accepted but also
started to respond properly to these policy changes. The Chinese
people have become acclimated to their economy's rapid development.
Many economists have no fear that the Chinese economy, currently
growing at a rapid but stable rate, will overheat. Frank Gong, the
chief China economist at JPMorgan Chase, raised China's 2007 GDP
increase rate forecast from 10.8 percent to 11.3 percent. He also
increased the 2008 GDP increase rate forecast from 9.5 percent to
10.5 percent. Moreover, the research team of China International
Capital Corporation Limited believe that China continue their
pattern of “high growth and low inflation" a while longer.
But a few experts disagree. Song Guoqing, a professor with
Peking University's China Center for Economic Research, argues that
both the growth in aggregate demand and this year's prices resemble
the levels found in 2003 and 2004. He warned that if effective
measures were not adopted, this year's inflation rate would reach
3.9 percent to 4.0 percent, or even above 4.2 percent.
For more details, please read the full story in Chinese.(
http://www.caijing.com.cn/newcn/home/todayspec/2007-07-22/25105.shtml)
(China.org.cn July 23, 2007)
