Home | About Us | Contact Us | Site Map | Chinese
News | Biz | Pearl River Delta | Enjoy Life | Culture | Travelling | Pics | Cities & Towns | Gov Info | Specials
Current Home > Business > Biz Headlines
Central bank raises rates, reserve ratio
Latest Updated by 2007-05-21 08:46:49
Related News
CPI eases, pressure for interest rates hike remains
About 100 mln Chinese become stock holders
Stocks heading for full-scale mania: CLSA
Stocks fall amid warnings to investors
Stock market gathering risks: banker
China's CPI rises three percent in April
Business News
Central bank raises rates, reserve ratio
Global warming 'golden opportunity'
About 100 mln Chinese become stock holders

More News About: China's stock market >>>

China raised interest rates and bank reserve requirement ratio on Friday in the latest effort to prevent the economy from overheating.

That marked the first simultaneous use of the two monetary tools in a decade, as well as the eighth increase in reserve ratio since last July and fourth interest rate hike since last April.

The benchmark one-year deposit rate will be increased by 0.27 percentage point while the one-year lending rate will rise 0.18 percentage point starting from Saturday, the People's Bank of China said in a statement on its website.

After the announcement, the one-year deposit rate stands at 3.06 percent, slightly higher than the consumer price index growth of 3 percent in April. The one-year lending rate is now 6.57 percent.

The banks' reserve requirement ratio will be raised by 0.5 percentage points to 11.5 percent, effective from June 5, the central bank said.

The tightening measures came after a series of economic data suggested that the world's fourth largest economy is evolving towards overheating.

The gross domestic product grew 11.1 percent in the first quarter of the year while urban fixed asset investment soared 25.5 percent, official statistics showed.

Banks extended 422 billion yuan in new loans in April, bringing the amount for the first four months to 1.85 trillion yuan - more than half the total for the whole of 2006.

Inflation, measured by the consumer price index (CPI), grew three percent in April, barely meeting the central bank's target.

CPI growth not to slow down

The interest rate hike is not unexpected, said economist Wang Xiaoguang. "However, the increase of interest rates and bank reserve ratio at the same time is the first in this round of macro economic control."

This indicated macro control by the government is strengthening to prevent the economy from becoming overheated, said Wang.

Ha Jiming, chief economist of China International Capital Corporation expected the tightening to produce some effects, albeit limited.

However, the interest rate hike can hardly slow down the pace of CPI growth in the coming months, said Ha, citing the rise in grain and resource prices.

Limited influence on stock market

Most economists believed the new measure does not target the stock market which has soared 50 percent so far this year on top of a 130 percent rally in 2006, prompting concerns about bubbles.

"The central bank move does not mean to crack down on the stock market," said Xia Bin of the Development Research Center under the State Council. "It mainly addresses excessive liquidity in the macro economy."

However, the tightening is sure to have some negative influence on the equity market, noted Xia. But the impact may be small, said Liu Jipeng of China University of Political Science and Law.

Even after the rise, the deposit interest rate in the country is still low, explained Liu. Therefore, the diversion from bank deposits to stock market will not stop.

On the stocks that will be more adversely affected than others, Liu Yihui of the Chinese Academy of Social Science points to bank shares while Ha Jiming picked industries with a high debt ratio.

The increase of deposit rate is bigger than the rise in lending rate, hereby reducing the banks' interest spread and thus affecting their profit from lending, explained Liu.

Editor: Yan

By: Dong ZhixinSource: China Daily Website
Previous:    Next:Global warming 'golden opportunity'

Fair helps build GD culture

Human Domino get people relaxed

[Guangzhou] Eight New Attractive Places of Liwan District Selected

First privately-run expressway opens in Guangdong

China beat S Korea 5-2 in women's soccer friendly
This site contains material from other media for content enrichment purpose only.
The website do not endorse such content and do not bear the joint responsibility of their copyright infringement.
The views expressed in written material posted to the bulletin boards of are those of the authors and/or publishers. The website does not endorse information products posted by organizations and individuals here. The originators of these information products are solely responsible for their content.
For copyright infringement issues, you shall contact within thirty (30) days. Email:
If you find any error in this page, please drag your mouse to mark the text with error, then press "CTRL" and "ENTER", to inform us. Thanks for your help!
Home  |  About Us  |   Contact Us  |  Site Map  |  Chinese
©2005 WWW.NEWSGD.COM. All rights reserved.registered number 020074 Terms of Use | Advertise | ICP Certificate No.B2-20050252
Guangdong Gov Link
Guangdong Gov Brief
State Structure
Guangdong in Brief
Laws & Regulations
Exchange Rate
Guangdong Guide
Museum Museum
University University
Eat Eat
Shopping Duting
Night Life Night Life
Weather Weather
Phone No. Phone Num
Consulate Consulate
Airport Airport
Travel Tips Tours Tips