Rate hike: A double edged sword

And more on the news, many experts have voiced concerns about the potential risks created by the rate hike.

Some are warning of attracting too much speculative 'hot money' into the country, if interest rates become even more attractive. That's in relation to rates in most Western countries, which vary between 0 to 2 percent.

Analysts say, China's regulatory authority should take steps to prevent the fast flow of hot money from impacting China's real economy. As the one-year yuan lending rate has been raised to 6.56 percent, the costs of small and medium-sized enterprises will also increase. Experts say, fiscal and tax policies also need tweaking, to alleviate some of the pressure.

Tan Yaling, Director, China Forex Investent Research Institute, said, "The companies' profit margins are narrowing and they are facing many pressures. The rate hike could exacerbate the situation. So the government should outline certain supportive policies to help the development of small and medium-sized enterprises."

Editor:Liu Fang |Source: CNTV.CN


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