NYT: China raises interest rates, a "turning point"

Updated On: Jan 08, 2010

Keith Bradsher at the New York Times reports that China has finally raised interest rates, signaling that the country's monetary policy may be tightening.

From the NYT:

HONG KONG — China’s central bank raised a key interest rate slightly Thursday for the first time in nearly five months, in what economists interpreted as the beginning of a broader move to tighten monetary policy and forestall inflation.

After breaking stride a year ago during the global economic slowdown, the Chinese economy resumed galloping growth over the summer. Government investments, real estate construction and consumer spending are all rising briskly, thanks to a surge in lending by government-controlled banks.

Even exports have begun to recover despite continued economic weakness in the European Union and the United States, China’s two biggest overseas markets.

Raising interest rates may help discourage speculative investments by Chinese companies and individuals in real estate projects and other areas of economic activity. China’s dilemma is that higher rates may also prompt overseas investors seeking higher returns to redouble their efforts to push money into China, despite the country’s stringent capital controls.

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