Thu, Oct 21, 2010 - Page 12 News List

CEPD warns China may drop its stimulus measures

STAFF WRITER, WITH CNA

Tuesday’s hike in China’s key interest rate would be a prelude to a suspension of its economic stimulus measures, Council for Economic Planning and Development (CEPD) Minister Christina Liu (劉憶如) said yesterday.

Referring to the rise of 0.25 percentage points in China’s benchmark lending rates, its first increase since the onset of the global economic crisis, Liu said this came as no surprise, given that Beijing had already raised its deposit reserve ratio several times.

The rate hike, which included increases to 5.56 percent on a one-year loan and to 2.5 percent on one-year deposits, was aimed at lowering inflation pressure, Liu told a meeting of the legislature’s Economic Affairs Committee.

China experienced an inflation rate of 3.5 percent in August, which exceeded the 3 percent ceiling deemed acceptable by the Beijing authorities, she said.

The hike would also mean the beginning of the end to China’s US$585 billion stimulus measures introduced in 2008 to help weather the global economic crisis, she said, calling on Taiwanese businesses operating in China to prepare for the withdrawal of the measures.

For example, export-oriented China-based Taiwanese enterprises should shift their market focus to China instead of the US or Europe, she said, and that they should establish an information-sharing mechanism about China’s domestic market.

Meanwhile, central bank Governor Perng Fai-nan (彭淮南) told the legislature’s Financial Committee that China’s rate hike was “healthy.” He said it would help maintain a stable economic development for China in the long, as well as middle term.

Perng refused to say whether China’s higher interest rate would influence Taiwan’s stock market.

“It’s a highly sensitive issue, and I am not in a position to make any comment,” he said.

He was equally tight-lipped on whether it would affect Taiwan’s monetary policy.

Policy would be made by the bank’s board of directors and supervisors based on considerations of the domestic and global macroeconomic situation, he said.

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