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)
