A pork vender waits for customers at a Shanghai Wet market on Nov. 17. Local Pork prices have increased about 13 percent from a year ago. China's central bank recently raised its benchmark interest rates for the first time in nine years. The rise comes as the government struggles to curb investment that has pushed economic growth to more than 9 percent a year and inflation to a seven-year high.(Photo: Shanghai Daily)

Chinese banking policy-makers say the interest rate increase was introduced to deal with some contradictions and problems in economic and financial operations as macro-economic control measures begin to produce some positive results. The interest rate hike will also have a positive effect on many ordinary Chinese.

For ordinary Chinese citizens who have deposited most of their savings in banks, the interest rate hike of 0.27 percentage points is good news because the adjustments will help boost interest returns. Mid-to long-term deposit interest rates were raised by a larger amount than short-term rates.

Zhong Wei, researcher of Int'l Finance Research Center, Chinese Academy of Social Sciences, said, "The interest rate hike is a clear signal that consumer prices that have been running at rather high levels in recent months may well begin to cool down. Citizens who are concerned about trends in the consumer price index will see a slow growth rate and possibly even a reduction. This is the positive side of an interest rate increase."

But an increase in basic interest rates may have a negative impact on people who are buying their houses or cars with a mortgage or loan from the bank. They will now have to pay a higher rate of interest, and those with a 15 to 30 year mortgage will be the worst affected.

The central bank also scrapped the ceiling on lending rates that a bank can charge over mid and long term loans to small and medium-sized enterprises and private firms. Experts said the move may further boost the fledging sector and create more jobs.