Wed, Aug 22, 2007 - Page 11 News List

China's central bank to raise rates


China's central bank announced yesterday it would raise interest rates for the fourth time this year in an effort to curb inflation that last month climbed to its highest level in over a decade.

The benchmark lending rate will rise by 0.18 percentage points and the benchmark deposit rate will go up by 0.27 percentage points today, the People's Bank of China said in a statement on its Web site.

China's main bank lending rate will now be 7.02 percent, while the deposit rate jumps to 3.60 percent.

The decision was made "in order to reasonably adjust money and loan supply as well as stabilize inflation expectations," the statement said.


Economists had predicted that authorities would act quickly after data was released last week showing that China's economy was continuing to race ahead at a worringly fast pace.

The biggest concern for the government was inflation hitting 5.6 percent last month from a year earlier, the highest rate in more than a decade.

Inflation was driven mainly by a sharp 15.4-percent spike in food prices, with the price of meat rising 45.2 percent mainly because of a shortage of pork -- a staple of the Chinese diet.

China also last month posted a trade surplus of US$24.4 billion, the second-largest ever.


China has already tried a wide range of measures to control the economy, which expanded at 11.9 percent in the second quarter and 11.5 percent during the first half.

Interest rates had been already been raised three times this year, most recently on July 21.

The bank reserve ratio -- the amount of money banks must hold in reserve -- has been also increased six times to stem liquidity.

In addition, the government has placed various curbs on exports, and allowed the yuan to appreciate, albeit at a much slower pace than the US and China's other international trading partners had wanted.

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