Interest rate hike affects Chinese companies

08:48, December 29, 2010      

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The second interest rate hike in China this year is perhaps the strongest sign Beijing is cracking down on inflation. But it's sure to impact local businesses and their bottom line.

The rise in interest rates means local companies will have to pay more, to borrow money. And that will affect profit margins. But foreign companies in China have the benefit of being able to borrow elsewhere.

According to China's central bank, the country will bring its overall money supply to a normal level with a range of policy tools next year. That's as the government shifts monetary policy from "moderately loose" to "prudent".

With the global economic crisis having eased from its peak, experts believe the Chinese government should maintain a "reasonable and moderate" credit growth next year that is in line with the country's goal in economic development and inflation control.

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