China Lifts Interest Rates to Slow Economy
http://www.cbsnews.com/stories/2006/04/27/...D8H8JVA0H.shtml
(AP) China's central bank raised interest rates Thursday in the government's strongest move yet to cool an economy verging on overheating. The news sent resource stocks, oil and commodity prices lower around the world.
The People's Bank of China raised the minimum rate banks charge on one-year loans in local currency, the yuan, 27 basis points, to 5.85 percent. The increase, which goes into effect Friday, was the first since October 2004 when the central bank raised the lending rate the same amount.
Oil prices, which surged in recent months in part on growing demand from China, fell and shares of mining companies tumbled as traders bet that the growing demand for copper, steel and other commodities fueled by China's rapid expansion could slow.
The Chinese economy expanded at a 10.2 percent in the first quarter from a year ago, aided in part by hefty lending by banks. That raised inflation fears and that already debt-laden banks could end up saddled with more bad loans.
Much of the bank lending is pouring into factories, buildings and other fixed assets. While the central bank rate increase is a broad move intended to discourage lending in general, the government has also taken more targeted measures in sectors where growth appears to be outstripping demand.