People’s Bank of China Cuts Interest Rates to Preserve the Regime?
People’s Bank of China (PBC) announced to cut RMB
benchmark deposit and loan interest rates for financial institutions starting July 6.
The one-year benchmark deposit interest rate will be lowered
by 0.25 percent, and the one-year benchmark loan interest rate will be cut by 0.31 percent.
Also, the loan interest rate floating range
for financial institutions will be increased to 30%.
In less than a month since the previous interest rate cut
on June 8, PBC has cut interest rates again.
Experts comment that the Communist regime
is drinking poison to quench thirst.
In order to maintain stability, the regime wields a policy
to protect its 8% GDP and to lower the unemployment rate.
Wang Jingwen, senior macroeconomic analyst of
Agricultural Bank of China, states in his article entitled,
“The Chinese style asymmetric cut of interest rates”,
that regardless of the magnitude and manner,
two consecutive interest rate cuts within a month
indeed reflect the current deteriorating economy.
The article states that the growth data for the first half
of the year, available in mid-July,
won’t look good and that’s the reason why the authorities
mandated the interest rate cut to the central bank.
The second quarter GDP will certainly fall below 8 percent
and continue the new low for the 5th quarter.
That the Qinhuangdao coal inventory continues its new high,
and both indicators of electricity consumption and cargo
volume are weak have shown the substantial economy is not optimistic.
According to the Caijing magazine, Zhang Weiying,
a professor and economist at Peking University’s Guanghua School of Management,
indicated at the Chinese entrepreneurs summer Summit,
that the heavy economic stimulus policy in 2008 has led to inflation.
Regarding the two interest rates cuts within a month,
if another new simulating policy is pushed, the resulting
large-scale investment will be a disaster to the Chinese economy.
Zhang Weiying believes that the Chinese economy
is in need of adjustment after 20 years of rapid growth.
Only through a period of slow growth will the transition
be possible and the future be hopeful.
However, he says, “the government is reluctant to rest,
and might end up exhausted.”
In addition, Dr. Cheng Xiaonong, a graduate
of the Sociology Department at Princeton University,
indicates the consecutive interest rate cuts
will soon bring inflation to China.
Cheng Xiaonong: “The Communist regime can’t implement
an anti-inflation policy for fear of recession and economic decline.
It reintroduced the monetary policy that caused inflation
four years ago, that is, to input a lot of currency. Inflation is expected soon."
Xie Tian, Professor of Aiken School of Business
at University of South Carolina analyses that
easy loaning may lead the funds to flow into
the stock market or housing market,
pushing up housing prices and bringing inflation.
Xie Tian: “The nepotism and the special interest groups
took the money will likely try to make profit through stock and housing markets.
Housing prices will rise further. Some might invest in real
construction projects and the construction workers will feel good.
The contractors or suppliers will also feel the business is better.
However, it will be a disaster to most Chinese.
We’ll soon see further rise in inflation,
and it is the general public who will have to pay."
Chinese Premier Wen Jiabao spoke on the 7th in Changzhou.
He indicated that now is a critical time for the real estate
market, that regulating the market is an arduous task,
and regulation of the real estate market must continue
to promote the return of affordable housing.
He once again stressed no price rebound.
Xie Tian says that the CCP is in a dilemma
to control housing prices.
It does not want housing to continue to rise and the bubble
to continue growing, but it would not dare to allow the housing market to fall and affect the banks.
He explains that the so-called “regulation" is the housing is not
so high that it would cause boiling grievances, but it is not so low that the bank will go bankrupt.
Xie Tian also points out the fundamental reason
for the Communist authorities to cut interest rates again
is due to the Communist regime panic over the massive
revolts of the people.
The Shifang riot has indicated a new trend of uprising
movements led by students from high schools and university.
Xie Tian says that the combined forces of the youth
and the general public will be sufficient to overthrow the Communist Party of China.
The Communist China was forced to protect its 8% GDP
and reduce unemployment to maintain regime stability.