| Abstract | Lower inflation and stable economic growth have enabled the Chinese authorities to partially relax the country's monetary policy stance, in place since 1993. Interest rates on loans and deposits were reduced first in May 1996 and more recently in August 1996. Such moves are unlikely to have a significant impact on the economy as consumer borrowing is limited and major investment remains the prerogative of the government. Lower interest rates, however, would provide short-term relief to many cash-strapped state-owned enterprises (SOEs) while state banks would also benefit from a widening of interest margins. Further explanation and analysis are given in this article. |
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