253 lines
6.5 KiB
Plaintext
Executable File
253 lines
6.5 KiB
Plaintext
Executable File
finance
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financialcrisis
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8225044
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-----
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# China raises interest rates on Christmas Day
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## China raised interest rates for a second time in three months on Christmas
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Day in an attempt to curb borrowing, rein in property prices and tame
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inflation.
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![China raises interest rates on Christmas Day][1]
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Analysts expect more interest rate rises next year as the government steps up
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efforts to calm growing consumer anxiety about rising costs. Photo: AFP/Getty
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AFP 5:21PM GMT 25 Dec 2010
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[Comments][2]
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The People's Bank of China said in a brief one-line statement that it will
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raise the one-year lending and deposit rates by 25 basis points each. The move
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takes the rates to 5.81pc and 2.75pc respectively from Sunday.
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Expectations of a rate rise have weighed on investor sentiment this month and
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could hit stock markets next week.
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In October, policymakers raised rates for the first time in nearly three years
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as they resort to stronger measures to try to slow a flood of liquidity which
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has been fanning inflation and driving up property prices.
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Analysts said the latest interest rate rise would be followed by more next
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year as stability-obsessed leaders step up efforts to calm growing consumer
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anxiety about rising costs.
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"The choice of Christmas Day is a little surprising but I think the market
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generally expected interest rates to rise," Ken Peng, a Beijing-based
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economist for Citigroup, told AFP.
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"The central bank needed to do this to win credibility to fight inflation."
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Ever fearful of inflation's potential to spark unrest, authorities have been
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pulling on a number of policy levers to rein in consumer prices and cool the
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red-hot real estate market.
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Earlier this month, the central bank ordered lenders for the sixth time this
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year to keep more money in reserve, effectively limiting the amount of funds
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they can lend.
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Despite these measures, bank lending has remained stubbornly high and property
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prices have continued to rise, frustrating first-home buyers who feel
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apartment prices are out of their reach.
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Property prices in 70 major cities recorded their third straight month-on-
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month rise in November, defying Beijing's attempts to cool the red-hot market
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by hiking minimum downpayments and ordering banks not to provide loans for
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third home purchases.
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Prices were up 0.3pc last month from October and 7.7pc higher than a year ago.
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The value of new loans issued by China's banks fell in November from October
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but was still well above forecasts as Beijing struggled to stem the flood of
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liquidity.
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Adding to the Beijing's headaches, the consumer price index, a key measure of
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inflation, topped 5pc in November for the first time in more than two years as
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food costs soared nearly 12pc year-on-year.
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Further interest rate increases had been expected after top leaders pledged
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earlier this month that China would move from a "relatively loose" monetary
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policy to a "prudent" one next year.
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"We expect two to three rate hikes in the first half of 2011," said Wang Qing,
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a Hong Kong-based economist for Morgan Stanley.
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The central bank said Friday it would use a variety of tools including
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interest rate hikes and tighter lending restrictions over the next 12 months
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to curb inflation and prevent an asset price bubble, according to comments by
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vice governor Hu Xiaolian posted on the bank's website.
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[Tweet][13]
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http://www.telegraph.co.uk/finance/financialcrisis/8225044/China-raises-
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interest-rates-on-Christmas-Day.html
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Telegraph
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## [Financial Crisis][14]
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* ### [Finance »][15]
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* ### [Economics »][16]
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* ### [Markets »][17]
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* ### [China business »][18]
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In finance
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[![Truncheon-wielding police in Barcelona have clashed with protesters at a
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makeshift camp that is one of dozens erected in Spain to protest at high
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unemployment][19] ][20]
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### [Spanish anti-crisis protests][20]
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[![Thousands of protesters occupy Puerta del Sol square in Madrid][21] ][22]
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### [Huge protests in Madrid][22]
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[![Riot police use tear gas as protesters throw petrol bombs in Athens][23]
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][24]
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### [Tear gas and petrol bombs][24]
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### [Irish bank stress tests: key points][26]
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### [Q&A: What is the Independent Commission on Banking?][28]
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[X][9] Share & bookmark
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Delicious Facebook Google Messenger Reddit Twitter
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Digg Fark LinkedIn Google Buzz StumbleUpon Y! Buzz
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[What are these?][10]
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Share:
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* [ ][9]
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* [ ][11]
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* [ ][12]
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* [Tweet][13]
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* Advertisement
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![][29]
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telegraphuk
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Please enable JavaScript to view the [comments powered by Disqus.][30] [blog
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comments powered by Disqus][31]
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