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Lending rate cut good news for auto industry

By Shangguan Zhoudong (chinadaily.com.cn)
Updated: 2008-09-18 11:49

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Industry insiders say the new cut in lending rates will be good news for China's automobile industry.

The National Business Daily quoted insiders as saying the new loan rate, effective from September 16 this year, will help automotive businesses, which generally need huge amounts of loans.

The central bank cut the cost of bank loans on September 15 for the first time since 2002, and lowered the proportion money lenders must have as reserves. It is the first such move in nine years to help keep the economy from sliding further. The benchmark lending rate will be lowered by 0.27 percentage point to 7.20 percent from September 16.

Auto experts pointed out the bank loan cut is a timely aid to boost auto sales in September in the country's auto industry, which suffered a year-on-year sales decline in August.

But the lending rate reduction may also trigger a new round of price wars, experts said.

Some small-sized automakers' capital pressure will be relieved as they are the first to be affected by tight monetary policy, declining auto consumption demands, soaring stocks and prices of raw materials.

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The full text is available in the September Issue ofAuto China