The central bank to be cautious in interest rate adjustment: official

10:32, May 14, 2010      

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The central bank will be conscious on interest rate adjustment, said Li De, an official with the People's Bank of China, the country's central bank. In addition, the central bank will continue supporting small and medium-sized enterprises' (SMEs) financing demand through bill discounting.

Several economies including Australia, Brazil and India are exiting their loose monetary policies. However, the Greek debt crisis and the Europe's 750 billion euro bailout package will greatly increase the difficulties in the exit of stimulus policies world wide.

Li noted that the growth rates of China's M1 (narrow measure of money supply) and M2 (broad money supply) are slowing down, and the CPI and PPI are rising. "The central bank should properly manage the relationship between the stable economic growth, economic restructuring and the management of inflation expectations."

As to the problem of the SMEs' financing difficulties, Li said that loans to SMEs still account for a relatively small proportion despite the rapid credit expansion. By the end of 2009, China's major banking institutions' outstanding loans to SMEs were 14.4 trillion yuan (around 2.11 trillion U.S. dollars), up 30.1 percent year on year.

Currently, interest rate margin is still Chinese banks' major profit source, which will be lower and lower with the promotion of marketization of interest rate.

"The expansion of services to SMEs will help to adjust banks' profit structure," Li said.

By People's Daily Online

(Editor:祁澍文)

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