Since China's economy showed some signs of overheating at the end of
last year, there has been grave concern about a possible rise in interest
rates. Some economists are again calling for hikes.
China's interest rates have either been cut or kept at low levels since
the People's Bank of China (PBOC), the nation's central bank, raised them
in 1995. Therefore, it is natural that people would think of raising interest
rates at the first hint of inflation.
However, there does not appear to be a compelling reason for PBOC to
make such a decision, especially hastily, at the present time.
PBOC may have had such plans, but recent changes in the situation have
rendered it unnecessary -- for the time being.
The strongest argument for raising interest rates is that the consumer
price index (CPI) reached 5 per cent by the end of June, a level generally
believed to herald inflation.
That is much higher than banks' deposit rates, and very close to rates
Interest rates would normally be raised in such cases.
Reality, however, often contradicts reason.
Experts with the National Bureau of Statistics (NBS) attributed 4.4 percentage
points in the 5-per-cent CPI increase to the price rise of food. That
hike was the result of the central government's moves to fatten farmers'
Higher incomes for farmers is a blessing for the national economy, not
an indication of inflation.
The CPI rise in June also delayed price hikes of non-food products during
last year's fourth quarter.
The causes that triggered that hike have diminished as a result of the
nation's efforts, late last year and early this year, to cool down some
It is likely the CPI will drop in the next few months, probably to 3
or 4 per cent.
That should be regarded as a return to normal, given the fact the CPI
growth was low, or even near zero, in recent years.
The national economy showed signs of overheating at the beginning of
That was probably the right time to raise interest rates.
The government chose several administrative measures to chill the fever
in some industrial sectors, but refrained from raising interest rates.
Matters in China are always complicated.
Overheating in some industrial sectors was caused by over investment
by local governments or government-favoured enterprises.
A higher loan interest rate would have done little to deter those governments
from borrowing money.
But raising interest rates on loans would have greatly affected small
and medium-sized non-governmental enterprises. That explains, in addition
to other considerations, why the central government hesitated to use the
magic wand to repel inflation.
Overheating countermeasures taken by the government have taken effect,
and investment in some sectors has ebbed and prices of some materials,
such as steel and cement, have dropped.
The measures unavoidably have led to some unwanted side effects -- non-government
investment has been stymied. In some places, Fujian Province for example,
some private companies have had to receive loans from private banking
houses -- with interest rates as high as 12 per cent.
Under such circumstances, the central bank has even less reason to raise
| BY PENG FEI
The Ministry of Commerce, one of the sponsors of the Eighth China International
Fair for Investment and Trade (CIFIT), announced recently that a number
of Fortune 500 companies will send delegations to the fair, which will
be held from Sept 8 to 11 in Xiamen, in East China's Fujian Province.
The ministry said it has received confirmation letters from companies
such as US-based Eastman Kokak, Japan-based Hitachi and Canon, and Sweden-based
"CIFIT will offer a good opportunity for Kodak to display its corporate
image and various products," said Tian Geng, manager of the public
relations department of Kodak (China) Co Ltd.
Kodak has attended all past seven CIFIT sessions, effectively promoted
its products and held successful exchanges with other participating businesses,
"We have three important production bases in Xiamen, the fair's host
city, therefore CIFIT has a special meaning to Kodak, " he added.
In 1998, Kodak invested US$1.2 billion in China's sensitive materials
industry. Most of the investment was channeled to Xiamen, where Kodak
successively built a sensitive film plant and two disposable camera plants.
Last year, Kodak earned more than US$1billion from its businesses in China.
The China branches have become one of the major profit sources for Kodak.
"We hope our products will become better and more comprehensively
known to business people form home and abroad through this year's fair,"
According to CIFIT's organizing committee, another business giant, Hitachi,
has ordered 55 booths covering 495 square metres. It will be the company's
first appearance at CIFIT.
"We look forward to promoting our brand image, meeting with new business
partners and looking for new investment opportunities during the fair,"
said an official with Hitachi (China) Co Ltd.
At the fair, Hitachi will showcase its wide range of products, including
household electrical appliances, automobiles and telecommunication system,
to make people more aware of its technical strength.
Both Kodak and Hitachi have shown great interest in the fair's International
Investment Forum, an economic forum with international influence and also
the biggest highlight for each session of CIFIT.
The two companies also said that their high-level leaders are expected
to attend the upcoming CIFIT and deliver speeches at the forum.
The number of foreign business delegates to the fair is predicted to be
larger than last year's, CIFIT's organizers said.
Statistics from the fair's organizing committee show that 11,781 foreign
delegates from companies and governments and business organizations in
102 countries and regions attended last year's fair.
Furthermore, nearly 200 famous entrepreneurs, experts and high-rank governmental
officials from more than 40 countries and regions gave speeches at various
forums and seminars during last year's fair, drawing about 7,000 participants.
The Eighth China International Fair for Trade and Investment (CIFIT)
is highlighting agricultural investment by scheduling a special forum
on international agricultural investment and project promotion. The forum
will serve as a platform for international financing and co-operation
in China's agricultural sector.The forum is co-sponsored by the Ministry
of Commerce and the Ministry of Agriculture. Leaders of related departments
will introduce the latest policies in the agricultural industry and some
experts will discuss the advances in agricultural science and technology.
Investment institutions and corporations from countries such as the United
States, Japan, Germany, UK, France, Canada and Australia have already
forwarded background materials on their delegations to the Organizing
Committee of the forum in an attempt to seek opportunities for future
Chairman of US-China Business Council and UPS CEO Michael L. Eskew and
President of the council Robert Kapp will be heading a delegation of member
enterprises to the Eighth CIFIT on September 8. Eskew is making his first
visit to this Fair.
Kapp delivered a speech at the "International Investment Forum"
during the Seventh CIFIT. President Eskew's decision to attend the fair
in person this year is interpreted as recognition and approval of CIFIT
by a major international business council as a key investment promotion
event both in China itself and around the world.
So far, more than 40 internationally known business chambers have confirmed
their attendance at the Fair.
The Matchmaking Symposium for FDI and Domestic Investment Projects has
had 4,512 domestic projects registered via the Internet, according the
Zeng Junsheng, the project chief of the organization committee of the
Eighth CIFIT. The symposium has attracted more than 400 agriculture and
Overseas investors are mainly from the United States, Canada, Britain
and other countries from Europe and Southeast Asia.
Project matchmaking is expected to make a breakthrough in terms of scale
Investment promotion organizations and enterprises from more than 50
countries and up to 60 corporations from China have registered for the
Matchmaking Symposium for Chinese enterprises to go global. Investment
targeting overseas countries is to be the highlight of the Eight CIFIT
This symposium enjoys high prestige and trust because of its official
background. More than 10 seminars and project promotion meetings will
offer policy and trade information. Overseas organizations and their Chinese
counterparts will hold "face to face, one to one" consultations,
showcasing their advantages in tailor-made service.
More project and trade information is available on the official website
of CIFIT, consultations are scheduled in the order of registration.