China will raise the one-year deposit and
loan interest rates by 0.27 and 0.18 percentage points, respectively, to 3.06
and 6.57 percent as of May 19, the central bank of China announced on Friday.
Governor of People's Bank of China
Zhou Xiaochuan attends the closing session of the Board of Governors of
the African Development Bank Group held in Shanghai May 17, 2007. The
central bank announced Friday to raise the deposit and lending rates from
May 19. [Reuters]
The People's Bank of China will also raise banks' reserve requirement ratio
by 0.5 percentage points to 11.5 percent,effective on June 5.
China will continue to use monetary instruments to maintain macro-economic
stability, the governor of the central bank said at a press conference on
Thursday. Zhou Xiaochuan said China may also consider other instruments to
maintain macro-economic stability in the country.
Zhou noted that China's macro-economic stability is very important both for
the nation and for its impact on the world economy.
The People's Bank of China has raised interest rates four times since April
27, 2006. In March 2007, China's central bank raised the interest rate by 0.27
It has raised the bank reserve ratio eight times over the past year, each
time by 0.5 percentage point. It stood at 7.5 percent of deposits before the
first increase last June. The last increase was on April 16.
But the tightening policies have largely failed to prevent the economy from
becoming overheated. The gross domestic product grew 11.1 percent in the first
quarter of the year, compared to last year at 10.7 percent, statistics showed.
Total value of the Chinese stocks hit 17.43 trillion yuan (US$2.27 trillion)
yesterday and has likely surpassed the total in household deposits, as money
continues to flow out of banks and into the stock market.
In April, total household renminbi deposits dropped to 17.37 trillion, a
decrease of 167.4 billion yuan (US$21.7 billion) compared with March. Household
deposits may drop further in May as investors are rushing to withdraw money from
savings accounts and pump them into the stock market, the Shanghai Securities