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China Eases Monetary Policy: Lower Import Prices?
From Marketwise
By Matt Histand 
November 2008

China announced that it is altering its monetary policy in an attempt to fight inflation, by cutting interest rates and easing bank lending restrictions. The latest tinkering by the People’s Bank of China includes a 0.27% drop in the rate commercial banks can charge for one-year loans to businesses to 7.2%, and a 1% drop in the share of assets that small and medium-sized banks must deposit in the central bank coffers. A combination of slowing exports due to rising prices along with a weakening real estate market and falling stock prices have prompted China to act.

Greater China’s (asi/58135) President Ben Zhang sees the move as pretty standard for China. While he doesn’t think it will have a huge impact immediately on the ad specialty industry, there would likely be some long-term benefits to the industry. “China has been doing this for a long time,” he says. “In the short term, I don’t know if it will really make any changes to our industry, with its concentration on low price; it’s a price-sensitive industry. But long term, it’s good news, because it should slow down inflation and give prices a soft landing.”

Jonathan Isaacson, president of Gemline (asi/56070), agrees that China’s efforts will not likely have an immediate effect on the promotional industry and will take time to work through the system. But he stopped short of calling China’s latest moves typical. “I don’t think it’s more of the same,” he says. “I think that it’s clear that we are dealing with a global slowing, and it’s clear that China will be affected by that. I think it’s too early to figure out exactly how.” – MH

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