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AP
China Boosts Interest Rates
Friday May 18, 8:48 am ET
By Joe Mcdonald, AP Business Writer
China Raises Interest Rates in Renewed Effort to Cool Economy
BEIJING (AP) -- China raised interest rates on Friday for the second time in just over two months and tightened access to credit in a renewed effort to cool its sizzling economy.
Economists had expected the increase after the government reported investment in real estate, factories and other urban assets was growing by double digits, indicating earlier interest rate rises were failing to moderate the boom.
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The latest 0.18 percent increase takes effect Saturday and raises lending rates to 6.57 percent on a commercial one-year loan, the central bank said on its Web site.
The government also ordered commercial banks to increase the amount of money they set aside as reserves to reduce the pool of credit for lending. The reserve increase takes effect June 5, the central bank said in a separate statement.
China's leaders worry that a construction and lending boom could ignite politically dangerous inflation or a debt crisis.
The government reported Thursday that investment in urban fixed assets jumped by 25.5 percent in the first four months of the year. That exceeded the 2006 full-year growth rate of 24.5 percent.
The government also has imposed investment curbs and banned some types of projects outright in the textile, auto and other industries where supply exceeds demand.
But the controls have had a limited impact in a system that is flush with money from booming exports and economic growth that is expected to top 10 percent this year for a fifth straight year.
The last interest rate increase was on March 17.
Premier Wen Jiabao, China's top economic official, said Wednesday the government will make interest rates more flexible and control the growth of the money supply to ensure economic stability.
"There are some problems. We face excessive liquidity, an imbalance in the balance of payments, and rapid accumulation of foreign exchange. But we are taking measures to deal with these issues," Wen said in Shanghai at a meeting of the African Development Bank.
(This version CORRECTS that lending rates will rise 0.18 percent to 6.57 percent, instead of 0.27 percent to 6.66 percent.)
AP
China Boosts Interest Rates
Friday May 18, 8:48 am ET
By Joe Mcdonald, AP Business Writer
China Raises Interest Rates in Renewed Effort to Cool Economy
BEIJING (AP) -- China raised interest rates on Friday for the second time in just over two months and tightened access to credit in a renewed effort to cool its sizzling economy.
Economists had expected the increase after the government reported investment in real estate, factories and other urban assets was growing by double digits, indicating earlier interest rate rises were failing to moderate the boom.
ADVERTISEMENT
The latest 0.18 percent increase takes effect Saturday and raises lending rates to 6.57 percent on a commercial one-year loan, the central bank said on its Web site.
The government also ordered commercial banks to increase the amount of money they set aside as reserves to reduce the pool of credit for lending. The reserve increase takes effect June 5, the central bank said in a separate statement.
China's leaders worry that a construction and lending boom could ignite politically dangerous inflation or a debt crisis.
The government reported Thursday that investment in urban fixed assets jumped by 25.5 percent in the first four months of the year. That exceeded the 2006 full-year growth rate of 24.5 percent.
The government also has imposed investment curbs and banned some types of projects outright in the textile, auto and other industries where supply exceeds demand.
But the controls have had a limited impact in a system that is flush with money from booming exports and economic growth that is expected to top 10 percent this year for a fifth straight year.
The last interest rate increase was on March 17.
Premier Wen Jiabao, China's top economic official, said Wednesday the government will make interest rates more flexible and control the growth of the money supply to ensure economic stability.
"There are some problems. We face excessive liquidity, an imbalance in the balance of payments, and rapid accumulation of foreign exchange. But we are taking measures to deal with these issues," Wen said in Shanghai at a meeting of the African Development Bank.
(This version CORRECTS that lending rates will rise 0.18 percent to 6.57 percent, instead of 0.27 percent to 6.66 percent.)
