Another rate cut possible, says central bank governor

By Lydia Chen  |   2008-12-16  |     ONLINE EDITION

CHINA may cut interest rates again this month depending on how quickly inflation declines, People's Bank of China Governor Zhou Xiaochuan said in Hong Kong today.

Another rate cut, following the last slash on November 27, is possible until the middle of next year given that consumer prices are "going down and sometimes even faster than we think," Zhou said at the Financial Stability Forum.

China's economy may be heading for its slowest growth in two decades as global financial turmoil cuts demand. The government pledged on Saturday to boost liquidity after cutting interest rates last month by the most in 11 years to spur lending and consumption.

Spending on factories and real estate rose 26.8 percent in the first 11 months from a year earlier, down from a 27.2 percent gain through October, the statistics bureau said today.

Industrial output slowed to a record low of 5.4 percent in November since data was created in 1999 while exports fell 2.2 percent last month year-on-year. It was the first time in seven years that exports fell as demand declined in the United States, Europe and Japan.

The CPI climbed 2.4 percent in November from a year ago, the weakest in almost two years, according to reports released by the National Bureau of Statistics in the past week. It was the seventh consecutive drop this year.

China is targeting 8 percent economic expansion next year to create enough jobs and maintain social stability, China Banking Regulatory Commission Chairman Liu Mingkang said in Beijing on Saturday.

That would be down from 9.9 percent in the first three quarters of this year and 11.9 percent in 2007.

The People's Bank of China, the central bank, cut its key lending rate by the most in 11 years to spur the country's economy amid the ongoing global financial crisis.