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Comments on China's huge interest rate cut Wednesday

By Xin Zhiming and Wang Bo  (China Daily)
Updated: 2008-11-26 20:48

Special coverage:
Interest Rate Cut
Coping with Financial Crisis

Zhang Xiaojing: director, macroeconomic research department, Chinese Academy of Social Sciences

Such a considerable adjustment in interest rates indicates that policymakers have reached a common consensus that the Chinese economy is facing tough times. The several tiny revisions in interest rates earlier yielded limited results, because monetary policy is often not quite effective when the economy is in a downturn. We cannot count on monetary policy to maintain economic growth, but without it, the effect of fiscal policy cannot be maximized.

It is expected that the 108 basis point reduction will help stimulate investment and shore up the stock and real estate markets. There is still room for further interest rates cut next year, as inflation pressure is largely eased.

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