GF 323
CONFIDENTIAL
,
12
機密
The People's Construction Bank is to
impose centralized control over the funds.
for building halls, galleries, canteens,
etc.
Loans will not be made available to small
local enterprises which compete with large
state-run enterprises for scarce raw
materials. This refers particularly to
small factories engaging in the tobacco,
oil refinery, distillery, and textiles
industries.
17.
PBOC will send investigation teams to
various banks to look into any
malpractices in their credit policy.
It is obvious that most of the above steps
involve blunt administrative measures incapable of
distinguishing financially viable projects from non-viable
ones. There was little mention of the use of economic
means, such as higher interest rates, to contain the growth in loan demand. The Chinese authorities apparently
face a dilemma in this aspect. Increased interest rates will add to the burden of the ailing state enterprises
which may in turn demand either higher prices for their
output or an increase in state subsidies. On the other
hand, if interest rates are to remain at their current low level which is still only 9% for general loans, despite the latest increase of about one percentage point on
1 September 1988, enterprises have little incentive to
rationalize their use of funds. Not only is there an
almost insatiable demand for investment funds, but there
is also a tendency for enterprises to demand more loans
CONFIDENTIAL
機密
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