China May Raise Interest Rates To Rein In Money Supply
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China, the world’s fastest-growing major economy, is likely to raise interest rates at least once in the next six months to rein in the supply of money to curb asset bubbles, inflation, and excessive investment in factories.
The People’s Bank of China will also order banks to set aside extra money as reserves at least two more times this year, according to a Bloomberg News survey of 24 economists.
A trade surplus that may reach a record $200 billion in 2007 has swamped the financial system with cash, boosting the likelihood of boom-and-bust cycles in stocks and property. Premier Wen Jiabao has described investment growth as too fast and the economic expansion as unstable and environmentally unsustainable.
China’s economy expanded 10.7% last year, the fastest pace since 1995, and contributed about a 10th of global growth. The trade surplus was $177.5 billion. The country is trying to boost domestic consumption to stop relying so heavily on exports and investment for growth.
