BEIJING, May 18 (Xinhua) -- China will raise one-year deposit and
loan interest rates by 0.27 and 0.18 percentage points respectively, to 3.06
percent and 6.57 percent as of May 19, the People's Bank of China announced on
Friday.
The central bank will also raise the reserve
requirement ratio for commercial banks by 0.5 percentage point to 11.5 percent
as of June 5.
This is the first time in 10 years that the central
bank has simultaneously raised the benchmark interest rates and the bank reserve
ratio.
The move aims to "strengthen liquidity management in
the banking system, rationalize the growth of lending and investment and
maintaining price stability", the central bank said in a statement on its
website.
"The problems currently facing China's economy are so
complex that a single adjustment cannot on its own accomplish all the objectives
of macro control policy", said Wang Tongsan, a researcher with the Chinese
Academy of Social Sciences (CASS).
"Raising the interest rates and bank reserve ratio at
the same time will help prevent the fast growing economy from overheating and
ensure economic stability", said Wang.
"The decision is reasonable and within people's
expectations", said Yin Jianfeng, a CASS financial expert.
"By doing so, the central bank attempts to impose
curbs on excessive investment and the speculative bubble on the stock market,
but it is too early to say whether the move will be effective", said Yin.
China has raised interest rates five times since 2004
and the bank reserve ratio eight times since 2006.
But the country's urban fixed asset investment was
2.26 trillion yuan (290 billion U.S. dollars) in the first four months of this
year, up 25.5 percent from the same 2006 period, according to the National
Bureau of Statistics.
The figure compares with a 25.3 percent rise in the
first quarter and last year's growth rate of 24.5 percent, suggesting there had
been no fundamental changes in the overall trend in the country's investment
growth.
Meanwhile, newly-added outstanding loans surged to
1.42 trillion in the first quarter, 13 percent up from the same period last year
and almost half of the quota set by the central bank for the whole year.
"As far as the central bank is concerned, the economy
is moving too quickly. There is too much lending and too much liquidity, which
is why it has adopted a series of austerity measures," said Hu Yuhang, an
analyst with CITIC Securities.
As Chinese shares continuously hit new highs, the
mainland's two bourses saw their market value surpassing the country's savings
deposits on May 17.
"We can wait and see whether the interest rate rise
brings people's money back from the stock market into their bank accounts", said
Yin.
SHANGHAI, May 17 (Xinhua) -- China will
continue to use monetary instruments to maintain macro-economic stability, the
governor of China's central bank said on Thursday.
"We will keep using monetary policy instruments and
may consider other instruments to maintain macro-economic stability in China,"
President of the People's Bank of China Zhou Xiaochuan told the press. Full story
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