Interest rates could go up by spring, say economists

PUBLISHED : Wednesday, 20 October, 2004, 12:00am
UPDATED : Wednesday, 20 October, 2004, 12:00am

Most leading mainland economists surveyed by the State Statistical Bureau believe the central bank could raise interest rates in the next six months, a report said yesterday.

The survey, for which 50 economists were interviewed, found that two-thirds agreed that an interest rate rise could be on the agenda.

'This is markedly different from the previous two quarters, when economists were divided over interest rate increases,' the China Economic Times quoted an analysis which accompanied the survey as saying.

On the sensitive issue of exchange rates, 19 of the 50 economists said the US dollar was overvalued - indirectly suggesting that the yuan should be allowed to appreciate. In a similar survey conducted at the end of the second quarter, under a third of those surveyed supported an appreciation of the Chinese currency.

Half of the economists polled in the latest survey said the current exchange-rate peg of 8.28 yuan to the US dollar was 'about right'. That represented a four-percentage-point rise from the second-quarter survey.

On the subject of inflation, 31 said prices would rise in the next six months - up marginally from the three-fifths who said so in the second quarter.

Most of the economists shared the view that the mainland's economy would continue to grow quickly in the coming year.

According to the report, 35 believed the mainland would be able to maintain a growth rate of 9 per cent this year and next. Forty said the mainland would be able to sustain a growth rate of at least 8 per cent for the two years.

All of the economists interviewed said the mainland economy was not overheated, giving a vote of confidence to the central government's measures to cool the economy.

That finding marked a significant turnaround from the second-quarter survey. Three months ago, a quarter of the economists polled said the economy was 'relatively hot'.

In an earlier survey, in April, nearly two-thirds had said the mainland's economic growth rate was too fast to be sustainable.

The economists predicted that growth in fixed-asset investment would be reduced to 27 per cent by the end of the year after reaching a dizzying height of 42 per cent in the first quarter.

In their attempts to rein in breakneck economic growth, mainland authorities have preferred to implement administrative measures such as bans on investment in certain overheating sectors rather than raise interest rates.

Those macroeconomic measures have helped to take the steam out of the red-hot economy, with the growth rate slowing to 9.6 per cent year on year in the second quarter of this year, from 9.8 per cent in the first quarter.