A strange argument - China's interest rate should equal to its economic growth rate

Comments on Rajiv Kumar “Chinese exports and the global market: Bypassing infringement of WTO norms”, 15/12/2009, http://www.eastasiaforum.org/2009/12/15/chinese-exports-and-the-global-market-bypassing-infringement-of-wto-norms/

This is not the first time that I have seen the argument that China's official interest rate has been too low, so the households have been subsidising industrial firms. As a result, China's international competitiveness has been assisted by the subsidy.

If completely ignoring the world capital market, then one may be persuaded by this argument, or at least may be not inclined to finding it strange.

However, if one is true to reality, as opposed to some economists' strange very partial modelling/models, then one would find a big hole with this argument.

If capital is available at very cheap price from world market capital market, then what on earth should China's interest rate be linked to its rapid economic growth rate?

Further, why should there be such a link? Isn't economics about demand and supply equilibrium to clear the market including capital market?

I have indeed found it difficult to comprehend such an argument about interest rate in China. They don't mention inflation, but attempt arbitrarily to link it to economic growth rate.

To expose the fallacy of such an argument, let us suppose that the growth is purely driven by population growth, then why should that growth rate determine interest rate?

I find it puzzling to say the least.

Either some economists, or me are out of the normality of their minds of rationality to invent strange fantasies to argue for a point!

That is interesting or exciting perhaps, isn't it?

We have just lost Paul Samuelson – a great economist, so it may take a while to find a competent economist to sort this out.