July 7, 2011

Economic Observer Online

Translated by Song Chunling

Original article [Chinese]

China’s Central Bank on Wednesday raised key interest rates by 25 basis points for the third time this year, prompting a heated discussion on micro blogging site, Sina Weibo. Here is a sample of the posts:

Yang Hongxu (杨红旭), departmental director of Shanghai E-house R&D Institute estimates that this might be the last time that rates are raised in this cycle and argued that the higher rate will make corporate financing more difficult.

Yu Jinyong（禹晋永) the president of investment company Shidai, thinks the rate hike will cause redundancies, which will increase when small enterprises can’t raise funds.

One blogger going under the name Feminine Apparition (江南女妖) is afraid that the raise won’t affect the real estate speculators, but will put an extra burden on the working class, while Hu Jinghui(胡景晖) the vice president of real estate agency Wo Ai Wo Jia commented that appartment prices will fall faster, but appartments won't become more affordable because bigger down payments will be needed from house buyers. Another blogger under the name, The Hesitant Tomato (犹豫的番茄) doubts whether rising prices can really be controlled.

Professor Zhao Xiao (赵晓) from Beijing University of Science and Technology says that the rate hike shows the government’s great concern about prices and indicates that the current tightening cycle is reaching an end.

The one-year deposit rate now stands at 3.5%, up from 3.25%, and the one-year borrowing rate is to 6.56%, up from 6.31%. The interest rates on other deposits and loans will also rise.