BEIJING, March 19 -- Higher loan and savings interest rates went into effect Sunday as China moved to curb its booming credit and keep consumer prices stable.

    The one-year loan rate rose from 6.12 percent to 6.39 percent, and the one-year deposit rate climbed from 2.52 percent to 2.79 percent, China's central bank said on Saturday.

    The hikes were the first since August, when the central bank also lifted the benchmark one-year interest rate 0.27 percentage points.

    The rate increases "will be conducive to realizing reasonable growth in lending and investment, keeping overall prices stable and helping the financial system to operate steadily," the People's Bank of China said.

    China raised borrowing costs twice last year as the country strived to curb lending growth, reduce overcapacity and prevent prices from surging. In February, the central bank required banks to allocate more reserves for the fifth time in eight months to soak up money available for loans.

    "China's recent macroeconomic data showed the country's growth is still pretty fast and faces problems such as excess liquidity," said Zhu Yan, a Bank of China analyst.

    "The interest-rate rises had been expected, although the timing was a bit surprising as the market had speculated the central bank might wait for the March figures to decide," Zhu said.

    A series of economic data released this month reflected that China's economy continues to remain on a fast track with mounting liquidity.

    The country's trade surplus hit 23.76 billion U.S. dollars in February, the second-highest monthly figure. Money supply added 17.8 percent last month, the fastest growth in six months, and fixed-asset investment jumped 23.4 percent in the first two months.

    Consumer prices rose 2.7 percent last month, picking up from a 2.2 percent uptick in January. Industrial production soared 18.5 percent in January and February combined.

    Premier Wen Jiabao said on Friday that China's economy still faces big challenges such as structural instability and imbalances after years of rapid growth. Wen said problems include "too-fast rises in investments and bank loans, excessive monetary liquidity as well as imbalances in trade and international payments."

    The premier said the country will increase efforts to increase domestic demand and consumption as part of efforts to adjust the economic structure.

    Central bank Governor Zhou Xiaochuan also said last week that he believed the nation's consumer prices have grown "a bit faster" in recent months. Zhou said the central bank would further use interest rates, bank reserve requirements and bond issuances to soak up liquidity.

    "If credit growth and inflationary pressures can't be eased, the central bank may raise interest rates again in the second half," Ha Jiming, a China International Capital Corp economist, said on Sina.com.

    Ha said China may soon order commercial banks to park more money with the central bank by boosting the reserve requirement ratio another 0.5 percentage points.

    (Source: Shanghai Daily)