The central bank yesterday raised its benchmark interest rates
for the sixth time this year, in a bid to prevent the economy from
overheating and curb rising prices.
The People's Bank of China increased the one-year benchmark
deposit rate by 27 basis points to 4.14 percent while raising the
one-year lending rate by 18 basis points to 7.47 percent, effective
from today.
"This move is conducive to preventing the rapidly expanding
economy from overheating and structural price rises from evolving
into entrenched inflation," the central bank said in a statement on
its website.
"The gap in the increases shows that authorities would like to
rein in the lending enthusiasm of banks," said Guo Tianyong,
economist with the Central University of Finance and Economics
(CUFE).
Chinese banks are estimated to make a total of 3.6 trillion yuan
($490 billion) in new loans, about 420 billion yuan ($56.9 billion)
more than last year.
The Central Economic Work Conference early this month set the
tone for a "tight" monetary policy to be adopted next year to cool
off the fast-growing economy, which expanded by an impressive 11.5
percent year on year in the first three quarters.
"Raising the lending rate by a smaller margin is in line with
what the central policymakers want," Guo told China
Daily.
In a rare move, however, it lowered the rate for demand deposit
by 9 basis points to 0.72 percent.
Analysts said the move will encourage people to keep cash in the
bank rather than making it readily available for stock and property
investments.
The central bank raised the interest rates of three-month
deposits by 45 basis points and six-month deposits by 36 basis
points, both larger than the benchmark one-year interest rate
adjustment.
"It shows that pressure from shorter-term inflation is more
acute, and the authorities expect it to ease in the longer term,"
Song Guoqing, senior economist with Peking University's China
Center for Economic Research, told China Daily.
China's consumer price index, a key indicator measuring
inflation, rose to an 11-year high of 6.9 percent in November.
"At the same time, the apparent recent acceleration of non-pig
food inflation and higher producer prices might have unnerved the
authorities," said Stephen Green, head of research of Standard
Chartered Bank (China). "What is clear is that sentiment in Beijing
is changing - and it is likely that the first quarter of next year
will see more aggressive action to control inflation."
(China Daily December 21, 2007)
