Rate Change Widens Pool of Credit in China
By KEITH BRADSHER
Published: December 11, 2003
ONG KONG, Dec. 10 - China's central bank has sharply raised the maximum interest rates that banks can charge for commercial loans, a step that, paradoxically, is likely to make credit more widely available to private enterprises and speed China's transformation into a capitalist economy.
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The People's Bank of China said late on Wednesday that beginning in January, banks will be allowed to charge as much as 9.03 percent for commercial loans and 10.62 percent for agricultural loans, considerably more than before. This will allow big Chinese banks to lend money to risky private ventures at these fairly high rates, instead of denying such borrowers any loans, as often happens now with the lower regulated rates, economists said.
Economists at the International Monetary Fund and elsewhere, who had been urging China to adopt more flexible financial rules, welcomed the unexpected announcement. "It sounds like an important and very good step," said Steven V. Dunaway, the I.M.F.'s senior adviser for Asia and the Pacific.
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