Cut in rates and reserve ratio undesirable

THERE HAS BEEN SOME SPECULATION that a cut in interest rates and the deposit reserve ratio may be made to stimulate economy, but Changjiang Daily rules out the possibly:

That many place great hopes on a "double cut" has a lot to do with the policy's immediate effects on expanding investments and boosting economic growth. A "double cut" can significantly increase market liquidity and enterprises' funds, and such stimulus, to some extent, explains the country's rapid GDP growth in the past decade or so.

But it is also noteworthy that a "double cut" also has unwanted side effects such as inefficient and repeated investments, and the past cuts in interest rates and the deposit reserve ratio have resulted in overcapacity in heavy industries such as steelmaking and coal. This in turn has generated many "zombie" enterprises that struggle to make ends meet, adding more uncertainties to the country's long-term growth.