Central bank governor voices room for China´s interest rate increase

Source: Xinhua | 03-06-2008 12:06

BEIJING, March 6 (Xinhua) -- China's central bank governor Zhou Xiaochuan said Thursday there is room for interest rate increase, but domestic and international factors need to be considered before an adjustment.

Zhou Xiaochuan, governor of the People's Bank of China, answers a question from  journalists during a press conference on economic and social development and  macroeconomic regulation held by the First Session of the 11th National People's  Congress (NPC) at the Great Hall of the  People in Beijing, capital of China, March 6, 2008. (Xinhua Photo)

"There's certainly room for interest rate rise," said Zhou, governor of the People's Bank of China, at a press conference on the sidelines of the annual parliamentary and political advisory sessions.

"But we have to consider the benefits and defects of this leverage, as well as the timing and density of adjustment," he said in response to a journalist's question.

He said the recent fall of U.S. interest rate did affect China, but only partially. "China has many domestic factors to be considered in interest rate adjustment."

Zhou cited the influence of such adjustments on the domestic capital market and consumption, as the country is increasingly dependent on stimulating domestic demand, rather than exports, to spur economic growth.

"We take all factors into consideration and make comparisons, and strive to do a good job," he said.

Last year, the Central Bank raised interest rates six times and also increased banks' reserve requirement ratios 10 times, followed by another reserve requirement hike in January.

Meanwhile, successive interest rate cuts by the U.S. Federal Reserve to kick start the economy has widened the China-U.S. interest rate spread and helped weaken the U.S. currency further.

Some analysts said the central bank now had limited room to raise rates further and had to accelerate the yuan rise to curb inflation.

Editor:Zhang Pengfei