China is asked timely adjust interest rate

“It should raise the status of interest rate in running of monetary policy.” Said a senior economist of the World Bank on March 17, in agreeing with the continuity of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />China’s monetary policy, “the room left for fine-tune of rate appears even bigger than its decision-maker’s estimation”.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

He pointed out after the financial crisis, it seems somewhat different of China’s economic cycle from other countries, that China’s gross output has already stood  at its upper most position and “needs tightening”.

“In view of China’s economic performance, it suggests a higher rate policy is needed,” he continued, the present interest rate is maintaining much lower than that of tangible properties, real estate and the expected return of shares, thus touching off over investing and speculation which are all being got under control now by the government.

Decision-makers are always hesitating, for fear that high interest rate could affect capital flows, but in fact it sees little affection thereof. In 2009, the inflow of 73 billion dollars only accounted for 5 percent of the banking loans, which injected into stock market and real estate with little influence upon interest rate.

He advised that “it would be helpful to solve the problem of capital flows by making more flexible of exchange rate, that is, to introduce into exchange market the two-way risks of both exchange ups and downs. In this case, it would provide more room for China adjusting timely its domestic money policy, as to raise its interest rate at the lower rate status of high-income countries.