May 21 2007

Superstition and Monetary Policy in China Calendar, Abacus Help Determine Size of Chinese Rate Increases

Here’s an interesting piece about Monetary Policy in China.Superstition and Policy

“The People’s Bank of China today raised its one-year benchmark lending rate by 0.18 percentage point and its one-year deposit rate by 0.27 percentage point. Why 18 or 27 basis points instead of the increments of 25 used by most other central banks?

The answer has to do with the Chinese calendar and superstition, as well as the ancient Asian counting device, the abacus.”

While “traditional” Chinese culture may seem to disappear with globalization, the superstitions of old are alive and well in the financial community:

“`Rates divisible by nine avoid rounding of interest and allow easier calculation by abacus,” said Wang Qing, chief China economist at Morgan Stanley in Hong Kong.

In addition, the number nine in Chinese shares a pronunciation with the word “longevity” and has long been considered a lucky number. Chinese wedding feasts have nine dishes; Beijing’s Forbidden City has 9,999 rooms.

`The number nine is very important in the Chinese society and business world,’ said Chan Mansing, associate professor at the School of Chinese at the University of Hong Kong. `Nine stands for longevity, abundance and masculinity. It also represents the highest attainable level in all human endeavors in the Book of Change, a Chinese philosophy book that has been read for thousands of years.’ “

Hey, who knew?!

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About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

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