MercoPress, en Español

Montevideo, November 14th 2024 - 19:47 UTC

 

 

China hikes interest rates for the fourth time this year

Tuesday, August 21st 2007 - 21:00 UTC
Full article

China raised interest rates on Tuesday for the fourth time this year in an attempt to control the country's economic expansion as stock prices hit another record high and inflation in July was the highest in a decade.

The People's Bank of China raised its benchmark lending rate to 7.02%, from 6.84%, and the deposit rate to 3.60%, from 3.33%. Inflation hit 5.6% in July, driven by a 15.4% surge in food prices. Analysts said that the move came as no surprise and was also aimed at cooling rampant speculation on the stock market. With deposit rates lower than inflation, consumers can only lose money on their savings and choose to invest their funds into equities, helping to fuel a boom that is widely seen as unsustainable. The Shanghai Composite Index closed Tuesday at 4,955.21, its eighth record this month and up 22% from a month ago. China is the third country in the region to raise rates in the past week, after Australia and South Korea. The Bank of Japan is expected this week to postpone a rise because of turmoil on world markets. China's economy expanded in the second quarter 11.9% over the same quarter a year ago and given the fact that rates on deposits remain below inflation, the Chinese Central Bank could be suggesting it has not intention of putting the breaks on the growth rate. The Chinese government also announced that it was allowing its residents to invest in overseas markets, including Hong Kong Shares which were sharply higher. The Hang Seng Index gained 601 points or 2.8% to 22,196.63, off a high of 22,616.85. China's State Administration of Foreign Exchange said Monday it will allow residents in the Tianjin Binhai New Area to invest abroad, including the Hong Kong bourse, on a trial basis. The change in investment rule is seen allowing some of the vast pool of savings in China to find its way out of the mainland and into international markets, with Hong Kong expected to be a key beneficiary. China has more than 1.3 trillion US dollars in foreign currency reserves and some of these funds may flow into Hong Kong

Categories: Economy, International.

Top Comments

Disclaimer & comment rules

Commenting for this story is now closed.
If you have a Facebook account, become a fan and comment on our Facebook Page!