Central Bank of China

PRESS RELEASE Release Date: August 17, 2001




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Monetary Policy Decisions of the Board Meeting

(August 17, 2001)

The Board of the Central Bank of China (CBC) today decided to lower the discount rate, the rate on accommodations with collateral and the rate on accommodations without collateral each by 25 basis points, from 3.50%, 3.875% and 5.75% to 3.25%, 3.625% and 5.5%, respectively, effective from August 20.

Under the impact of the continuous global economic slowdown, for the first half of the year 2001 both exports and fixed capital formation registered sizable decline and private consumption also showed slower growth. As a result, the GDP growth rate slid from 0.91% as of the first quarter to minus 2.35% as of the second quarter this year. For the year as a whole, GDP is forecast to contract by 0.37% according to the Directorate General of Budget, Accounting and Statistics under the Cabinet. In terms of prices, CPI and core CPI inflation for the first seven months of this year were 0.27% and 0.45%, respectively. Domestic prices are expected to remain stable throughout the year. In addition, in accordance with the economic slowdown, funding conditions in the banking sector were easy, banks' excess reserves continued increasing, and market interest rates trended downwards.

Today's decision is made to boost the sagging economic sentiment and to reflect the downward trend of market interest rates, with the prerequisite of price and exchange rate stability.