To control money supply and curb rising prices, the People’s Bank of China has raised interest rate on bank deposits by 27 basis points to 3.6%, and the lending rates by 18 basis points, to 7.02% from 6.84%, fourth time this year.
On the basis of second quarter results, ended in July, economy expanded at 11.9%, which is the fastest growth in more than 12 years as exports and investment continue to boom. In the quarter consumer price index (CPI) surged to 5.6%, whereas money supply grew by 18.5% in July, 1.42 percentage points higher than in June and the fastest this year.
In the middle of higher growth, policy makers are speculating stiff surge in inflation rates, which is a matter of concerns from the early month of the year. The official target for inflation for 2007 is 3%, but with the high pace of growth rate and high liquidity can push inflation above the targeted figure.
China is among the few countries, which are increasing interest rates amidst the US subprime mortgagee generated woes. However in the last seven months Chinese trade surplus increases 67%, can add worries to the fast developing economy. To counter the subprime generated woes Chinese policy makers believe that country is free from the woes and on this point country needs to protect its millions of poor Chinese rather to protect the rights of millionaires’.
Via: IHT
