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To: JGoren who wrote (19183)	12/6/1998 11:35:00 AM
From: Jon Koplik	Read Replies (1) \| Respond to of 152472

O.T. - even China is cutting interest rates again (!). If our Fed is so stupid that they do not reduce rates again in a few weeks (or sooner), China can now say "We saw what was going on in the world. What's your problem ?" December 6, 1998 China's Bank Cuts Interest Rates To Halt Deflation, Revive Growth Dow Jones Newswires BEIJING -- In a surprise move aimed at halting price deflation and reviving global economic growth, China's central bank Sunday cut interest rates on both deposits and loans by 0.5 percentage point, Chinese state media reported. The interest rate cuts, which take effect Monday, are the third time the People's Bank of China has eased credit since October last year, the Xinhua News Agency reported. According to Xinhua, three-month deposits at Chinese financial institutions won't change, but rates on one-year fixed-term deposits have been sliced to 3.78% from 4.77%. Cuts on other deposits weren't specified. The benchmark one-year loans now carry an interest rate of 6.39%, down from 6.93%. Meanwhile, the central bank also reduced interest on deposits financial institutions must hold on reserve to 3.24% from 3.51%. An unidentified People's Bank of China spokesman said the bank wants to help reverse price deflation, ease debt burdens of state companies and ward off global recessionary pressures. "Based on these factors, there was a need to gradually reduce interest rates," Xinhua quoted the official as saying. Many experts had ruled out China loosening credit before year end. Previous interest rate cuts had failed to reverse losses at state enterprises or significantly spur consumer demand. Profits of China's state banks have been shrinking even with the lower interest on their lending. Beijing also wants to avoid possible pressure on the yuan, the semi-convertible currency leaders have promised to keep stable this year and next However, weak demand is taking its toll on the country's economy, said an official with China's State Planning Commission. "Consumer demand still isn't very good," the official told Dow Jones Newswires. "We need fewer people holding their money in banks, and more out buying goods or investing in stock markets." With wide scale layoffs at state companies, increasing costs for education and medical care, the Chinese are tending to save rather than spend. The State Planning Commission official said the latest interest rate cuts still may not be deep enough to lure cash from banks. "There probably won't be a big impact," he said. The slack spending has caused China's retail price index -- the benchmark for inflation -- to fall 2.5% in the first ten months of 1998, compared with the same period a year ago. The decline in demand has dragged on economic growth, despite government plans to pump some $1.2 trillion in investments into the economy over the next three years. China's gross domestic product grew 7.2% during the first nine months of 1998, even though exports have slowed sharply because of the economic slump in Asia. Before Sunday's action, Beijing had repeatedly called on major industrialized countries to help spur global demand by cutting interest rates. China's central bank said the interest rate cut by the U.S. Federal Reserve in September "created room" to lower Chinese bank rates, according to Xinhua. Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.