Yi Gang: Zero Interest Rate Not a Good Choice for China

Yi Gang, vice governor of the People's Bank of China, said that there is not much room for further interest rate cuts.

    Yi Gang, vice governor of the People's Bank of China, said recently that there is not much room for further interest rate cuts in China in the near future. He also said that compared with Japan and the U.S., Chinese interest rates seem higher, but different central banks calculate their interest rates based on totally different standards. China's central bank will not determine its interest rate policy simply by comparing figures. According to Yi Gang, while Japan's zero-interest policy has reduced the cost of borrowing money, investors are obtaining huge loans, exchanging them for foreign currencies and investing overseas, weakening the benefits of loose monetary policy for the Japanese economy. Hence, he believes, "A zero, or near-zero interest rate is not a good choice for China." Furthermore, domestic labor productivity is still rising, meaning most company profits are still increasing. In addition, bank savings account for a large portion of China's GDP, and the return on invested capital does not support a zero interest rate.