What a week that was. Wall Street suffered its worst week in history, and stocks worldwide lost billions in value. Central banks were forced to coordinate interest rate cuts. G7 Finance Ministers convened on an emergency basis in Washington while entire economies, such as Iceland, stand overlooking the abyss. The severity of the situation worsened by the hour.
In China, nerves are jangling as an entire generation faces the
possibility of its first economic slowdown. An increased sense of
financial vulnerability has filled the state media. China’s stock
markets fell further as investor confidence continued to dissipate, the
China business confidence index registered its lowest rating since the
2003 SARS crisis. Meanwhile, property analysts warned that Shanghai’s
office market is likely to be ‘pummeled’ by the global economic fallout.
China’s position is clear. Fully aware that the global meltdown is
already impacting its export markets, on which the economy is heavily
reliant, and foreign direct investment, it is looking both beyond and
within its own borders.
On Wednesday, China’s central bank cut both the interest rate (by 0.27
percentage points) and the bank reserve requirement ratio (by 0.5
percentage points) in an effort to ease liquidity. These moves follow a
trimming of the benchmark one-year lending rate, by 0.27 percentage
points, on 16 September – the first rate cut in six years. China also
lowered the reserve requirement for medium- and small-sized lenders by
one per cent on Sept. 25, following almost monthly rate rises during
the previous year and a half.
Deputy Governor of the People's Bank of China Yi Gang, attending an IMF
meeting in Washington, has pledged that China will involve itself in
international efforts to fight the financial meltdown. "China is
willing to strengthen its cooperation with other countries and, through
such joint efforts, we hope global financial stability can be
safeguarded," Yi said. "Our current priority is to enhance
international cooperation to prevent further deterioration and
spillover of the crisis and restore global economic and financial
stability," Yi said.
But China is also looking inward. "China has a huge domestic market and
the liquidity is abundant," said People’s Bank of China spokesman, Li
Chao. "As long as we take strong measures to boost domestic demand, the
economy has big potential for sustainable growth." Expect more measures
in the near term to protect and nurture this “big potential for
sustainable growth.”
Last update : Sunday, 12 October 2008
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