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Central bank raises deposit reserve ratio

(Xinhua)
Updated: 2006-08-16 09:51

Ha Jiming, chief economist of China International Capital Corporation Limited (CICC), expected the central bank to further raise the deposit reserve ratio by the end of this year to cool down the economy.

Some economists, however, suggest the central bank raise the benchmark interest rate, which is a more stringent means of reining in excessive loans.

Tang Min, chief economist with the China Mission of the Asian Development Bank (ADB), said he expects China to raise its interest rates soon.

"The overheating of the economy has become more and more obvious in the first six months of the year. The country needs to raise interest rates to solve the problem," he said.

The government has vowed to slow down the surge in fixed assets investment in sectors troubled by overcapacity and to control excessive money and credit supply but it seems to be very cautious about raising interest rates.

The last time the central bank adjusted interest rates was on April 27, when it raised the benchmark one-year loan interest rate from 5.58 percent to 5.85 percent, but did not change the rate for deposits.

Analysts said a higher interest rate on deposits may help curb excessive investment, but would also discourage consumption and investment in stock markets, which the government has been working hard to encourage so as to sustain economic development over the long term.