From Saturday, China's one-year benchmark interest will be raised by 0.27 percent as part of the continuing efforts to cool the surging economic growth, especially in fixed assets and real estate.
CRI's Yixiu reports.
 Reporter:
The rate hike was announced by the People's Bank of China, or the central bank.
As a result, commercial banks will raise annual interest rates for deposits to 2.52 percent and annual interest rates on loans to 6.12 percent.
Chinese Academy of Social Sciences researcher Yuan Gangming says the move is meant to dampen investment. By the end of July, lending organizations had already carried out 94% of the business projected for the whole year.
"Generally speaking, the economy is a bit of overheated. It is necessary to take some restrictive measures. Increasing the interest rate has proved to be a very effective way to rationalize lending and slow down investment."
China's economy surged ahead by 10.9 percent in the first half of this year, the fastest growth for a decade.
Urban fixed asset investment soared by more than 30 percent in the first seven months, up 3.3 percent on the previous year.
The Head of the Finance Institute under the State Council Development Research Centre, Xia Bin, predicts that the interest rate rise will also calm the stock market down.
"It will cause cash funds to shrink and probably make stock prices go down. But in the long term, it's hard to say how big and what size the impact will be, as there are many factors influencing the stock market."
Experts say the major force driving China's economy is the rapid growth in credit loans and excessive use of land for industrial projects.
In this latest move to cool down the economy, the central bank deliberately raised the interest rates for long-term loans by a larger margin than the rate for short-term loans.
It's designed to reduce the supply of middle to long-term loans that usually go on fixed asset investment.
Xia Bin says he expects further moves to rein in economic growth.
"The new interest rate takes effect now and the macro-development data for August will be released at the mid- September. The September data is released in the middle of October. By then, if the data shows the same high rate of economic growth, further stringent policies are very likely to be imposed."
The central bank's latest report says it will continue to use the "rational" restriction of money supply and loans as its main weapon against the overheating economy.
Yixiu, CRI news.
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