China raises interest rates to curb credit growth
By Leo Zhang 2007-3-17
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China will raise its benchmark borrowing and lending interest rates tomorrow to curb fast-growing credit and keep consumer prices stable, the central bank said today on its Website.
The one-year loan rate will rise from 6.12 percent to 6.39 percent, the People's Bank of China said in a statement. The one-year deposit rate will climb from 2.52 percent to 2.79 percent, it said.
The hikes were the first since last August when the central bank also lifted the benchmark interest rates by 27 basis points.
The rates increases "will lead to reasonable growth in lending and investment, keep the overall prices stable and keep the financial system operating steadily,'' the central bank said.
China raised borrowing costs twice last year as the country moved to curb inflation. In February, the central bank required banks to allocate more reserves for the fifth time in eight months to mop up money available for loans.
A slew of economic figures released recently showed that China's economy is still on a fast growth path and there is excessive liquidity.
The country's trade surplus hit US$23.76 billion last month, the second-highest monthly figure. Money supply added 17.8 percent in February, the fastest in six months.
Consumer prices rose 2.7 percent last month, picking up from a 2.2 percent rise in January while industrial production soared 18.5 percent in January and February combined.
Central bank Governor Zhou Xiaochuan said last week that China's consumer prices have grown "a bit faster" in recent months.
He said that China would continue to use interest rates, bank reserve requirements and bond issuances to reduce liquidity.