China May Raise Interest Rates to Cool Inflation (Update1)

China will raise involvement rates
this twelvemonth to chill rising prices that is close to an 11-year high,
according to a study of economists.

The cardinal volition addition from 7.47
percent, according to 11 of 15 economic experts surveyed by Bloomberg
News after the authorities reported April 16 that rising prices rose
8.3 percentage in March. The volition ascent from 4.14
percent, 10 economic experts said.

The People's Depository Financial Institution of People'S Republic Of China have held off raising borrowing
costs this twelvemonth to forestall the spread between its rates and those
of the U.S. from attracting money into the fiscal system. The
risk of rising prices will outweigh concern that bad inflows
will fuel terms gains, prompting the cardinal depository financial institution to resume
lifting rates after six additions in 2007, economic experts said.

''Money volition come up in anyway to theorize on the kwai and
maybe the plus markets,'' said , caput of China
research at Standard Chartered Depository Financial Institution Plc in Shanghai. ''We really
need some charge per unit tramps to undertake rising prices because other tools are
simply not effectual enough.''

The benchmark of shares drop 46.74, or 1.4
percent, to 3339.89 as of the 11:30 a.m. interruption in trading, on
concern that tightening measurements may dent company profits. The
index have declined 37 percentage this year.

China on April 16 also reported its economic system grew 10.6
percent in the first quarter, the 9th one-fourth of above 10
percent growth. Hours later, the cardinal depository financial institution ordered Banks to
set aside more than sedimentations as for the 3rd clip this year.

Four Rate Increases

Green foretells four interest-rate additions this year, the
first this quarter. Central depository financial institution Governor this
week said there is room to raise involvement rates.

Though rising prices in March eased from 8.7 percentage in
February, the extremum since May 1996, it may speed up again on
higher food, raw-material and labour costs, according to ,
chief People'S Republic Of China economic expert at Deutsche Depository Financial Institution AG. He foretells consumer
prices will leap 8.9 percentage in April.

''Given this still distressing rising prices outlook, the central
bank will have got to go on its tight pecuniary policy,'' said
Hong Kong-based Ma. Policy makers' mark for this
year is 4.8 percent, a degree registered for all of 2007.

Some economic experts anticipate the authorities to trust mostly on
currency grasp to cut down importation costs and narrow the
trade excess by making exportations more expensive, staunching the
flow of finances into the economy.

''As long as concerns over hot bad influxes still
linger, People'S Republic Of China will trust on a faster currency grasp to
tame prices,'' said , an economic expert at Capital
Economics Ltd. inch London.

The kwai have climbed more than than 4 percentage against the U.S.
dollar this year, compared with 7 percentage for all of 2007.

---------------------------------------------------
Lending Deposit
charge per unit rate
---------------------------------------------------
Number of Estimates 15 15
---------------------------------------------------
Action Economics 18 (May) 18 (May)
CFC Jane Seymour 18 (week) 18 (week)
China Galaxy Securities North Carolina 27 (April)
CIMB-GK Securities 27 (1H) 27 (1H)
China Investing Capital 1x nc
Citic Ka Wah Depository Financial Institution 27 (2x) nc
Daiwa Institute of Research 27 (week) 36 (week)
Goldman Sachs 27x2 27x2
JPMorgan Pursuit 3x (2H) 3x (2H)
Mitsubishi UFJ Securities 1x (1H) 1x (1H)
Morgan Francis Edgar Stanley North Carolina nc
Royal Depository Financial Institution of Scotland North Carolina nc
Shenyin Wanguo Sec. North Carolina nc
Standard Chartered Depository Financial Institution 4x 4x
UOB Group 18 (week) 27 (week)
---------------------------------------------------
Note: North Carolina = no change in the rates
18 = 18 footing points; 27 = 27 footing points
3x = 3 charge per unit additions this year
(May) = in May; (week) = by end of the week;
(2H) = in 2nd one-half of this year

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