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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

Li Jianwei: economist, State Council's Development Research Center

The scale of the rate cut, largely because of the previous expectations, is in line with current economic situation. The nation's industrial output grew only 8.2 percent in October, less than half of 17.6 percent growth in the first half. And the reading was still 11.4 percent in September.

This is a clear sign that economic growth will be weak in the fourth quarter with prospect for next year grimmer. The central government has already announced a series of massive stimulus package over the past month and it has earmarked an additional 1.18 trillion yuan for investment in 2009 and 2010. Now, it is necessary to further adjust monetary policy to spur the economy.

If all the measures are carried out effectively, the GDP growth could stay above 9 percent next year, rather than the World Bank's previous forecast of 7.5 percent. Such a massive interest rate cut could also help alter previous expectations of a further slowdown.

 

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