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BEIJING : China announced Friday it will raise interest rates and widen the trading ban of its currency, in two much anticipated moves ahead of a crucial economic meeting in Washington.
The central bank also moved to cool the nation's runaway economy and said it would raise the benchmark for one-year lending rates by 0.18 percentage points and hike the deposit rate by 0.27 percentage points.
The move, taking effect Saturday, was in order to ensure "reasonable growth" in credit and investments, and keep prices "basically stable," the People's Bank of China said in a statement on its website.
It is the fourth time that China has raised interest rates since last April, signalling its determination to cool down a liquidity-driven investment boom and a skyrocketing stock market.
The central bank also said that it would hike the required reserve ratio by 0.5 percentage point with effect from June 5.
It will also widen the trading range of its currency to 0.5 percent on either side of a daily reference rate against the US dollar from the previous 0.3 percent, with effect from Monday.
The rule change could lead to a faster appreciation of the yuan, given the upward pressure already on the Chinese currency.
China's central bank governor Zhou Xiaochuan said in Shanghai on Thursday the exchange rate would become "more and more flexible" to more closely reflect the market, echoing similar comments the day before by Premier Wen Jiabao.
The exchange rate is the main source of trade friction between the United States and China. Washington accuses the Chinese government of keeping the currency artificially low to give its exporters an unfair advantage.
China revalued the currency by 2.1 percent in July 2005 and since then has allowed it to gain about five percent more. - AFP/ch
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