| Tuesday, November 13, 2001, updated at 15:41(GMT+8) |
Central Bank Lowers Deposit Interest Rates on Certain Foreign Currencies |
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The People's Bank of China (PBOC) has been approved by the State Council to lower small-sum deposit interest rates on US dollar, UK pound, Euro, HK dollar, Canadian dollar and Swiss France as of November 12.
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The People's Bank of China (PBOC) has been approved by the State Council to lower small-sum deposit interest rates on US dollar, UK pound, Euro, HK dollar, Canadian dollar and Swiss France as of November 12.
It is learnt the one-year interest rates on US dollar, UK pound, Euro, HK dollar, Canadian dollar and Swiss France are reduced to 1.25%, 2.8125%, 2.0625%, 1.4375%, 1.625% and 0.9375% respectively, down 0.75, 0.4375, 0,4375, 0.6875, 0.75, 0.3125 percent respectively. This is the ninth time of such reduction by Central Bank this year.
This is a normal adjustment made on China's interest rates of foreign currencies so as to coordinate with interest rate changes on international financial markets.
Reforms have been carried out since September 2000 on China's administrative system of foreign currency, and interest rates of loans and foreign currency deposits equal or above US$3 million are to be adjusted by markets. While small-sum deposits under US$3 million are to be adjusted by PBOC according to changes on international financial markets. This is a major measure adopted in China's market-oriented interest rate reforms.
From beginning of this year to September 17, the US Federal Reserve had continuously reduced Federal Funds Rate and Rediscount Rate for eight times, resulting in continual slowdown of interest rates on international financial markets. According to the changes and real conditions of domestic financial market, PBOC had for eight times made decisions to cut small-sum deposit interest rates.
October 12 saw Federal Reserve announced its ninth-time interest rate reduction, which reached 4 percent, and November 16 saw the Federal Funds Rate and Rediscount Rate cut to 2 percent and 1.5 percent respectively.
The reduction triggered positive response from investors. After the tenth lowering the New York stock market began to rebound, with Dow Jones industrial average closed 1.6 percent higher than the previous day and Standard & Poor and Nasdaq up 1.5 percent and 2.3 percent respectively. Meanwhile, the European Central Bank and financial institutions of other countries and regions also followed the US to lower major interest rates and discount rates. China's reduction, is no doubt a responding adjustment following international financial markets.
Federal Reserve holds that in a coming period the US economy is still to be sluggish, which suggests the possibility of further rate cuts. Therefore China may still lower its small-sum deposit interest rates.
This year China's foreign exchange reserves increased quite rapidly and had exceeded US$200 billion by mid of last month, expert says, a result of increased exchange settlement for people no longer want to hold foreign currencies. This is because of reduced worries on RMB devaluation and the nation's striking on foreign exchange frauds, and more important, the continuous cutting of interest rates to narrow the deposit interest gap between US dollars and RMB.
In its 2001 third quarter report on implementation of monetary policy, PBOC says it will continue to play the leverage role of interest rates through timely adjustment of interest rate according to need of domestic economic development, the demand-supply situation of enterprises, as well as rate changes on international market.
By PD Online Staff Li Heng
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