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Experts: China likely to follow as Fed cuts rate

By Xin Zhiming (chinadaily.com.cn)
Updated: 2008-12-17 10:27

Special coverage: Interest Rate Cut

Related readings:  Further interest rate cuts likely

China may follow the United States when it cut its target funds rate down to virtually zero on Tuesday, analysts said.

In an historic decision, the US Federal Reserve slashed the target funds rate down to a range of 0-0.25 percent and said that "weak economic conditions are likely to warrant exceptionally low levels for some time".

Meanwhile, China's central bank governor Zhou Xiaochuan said in Hong Kong Tuesday that China was facing the pressure to cut its interest rates from now until early next year, which was interpreted as a sign of possible cuts just around the corner.

Zhang Jun, director of Fudan University's China Center for Economic Studies, said that China may soon cut its rates for the fifth time since September, when the economy began showing clear signs of slowdown.

Lu Zhengwei, economist with China's Industrial Bank, said the cut may be 27-54 basis points, while Frank Gong, JP Morgan's China chief economist, also said China will cut the rates by at least 27 basis points soon.

After the US cuts, the American economy is likely to recover sooner than expected, Zhang said. The pace of recovery could be faster than that of Europe, he told China Central Television on Wednesday.

The US move "gives us more hope that the economy will begin to pick up during 2009," said Stephen Green, senior economist with Standard Chartered Bank in China.