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China’s quarter percentage point increase in its benchmark interest rates on loans and deposits marks the first time the central bank has made a change that isn’t divisible by nine. The “divisible by nine” rule was largely a function of tradition, and based on the use of an abacus. Former Hong Kong Monetary Authority Chief Executive Joseph Yam explains: “These conversion rules were set based on the assumption that there were 360 days (rather than 365) and 12 months in a year, and always 30 days in a month. The daily rate is therefore the annual rate divided by 360 or the monthly rate divided by 30, and the monthly rate is the annual rate divided by 12… To avoid daily rates with recurring decimals, and the associated rounding complications in calculating the interest, annual interest rates (and any changes) have therefore to be divisible by 360.” “It is not difficult to see that this would make calculating interest more convenient if one was using an abacus instead of a calculator or computer. Perhaps this is why the tradition was established. Using an abacus to do division is a lot more difficult than to do multiplication, at least according to my own experience, particularly when one number is not divisible by the other. Although abacuses are not commonly used these days, the tradition lives on,” Yam continued. Nine also is considered a lucky number in China. It is a homophone for the word “forever” in Chinese — making it popular for weddings — and has associations with the emperor. We can only hope China’s deviation from the “divisible by nine” rule isn’t unlucky for the global economy |
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