Economists believe China should continue to strengthen its macro control policies following the rise in interest rates announced on Friday.

China raised its benchmark interest rate by 0.27 percent to prevent possible overheating in its economic boom - the second interest rate hike this year.

It will take some time for the interest rate adjustment to take effect and the macro control measures must be strengthened, said Wang Xiaoguang, economist with the National Development and Reform Commission.

The growth rate of China's urban fixed asset investment reached 30.5 percent in the first seven months, up 3.3 percent on the previous year but slightly down over the first half year's figure of 31.3 percent. The growth rate for July is estimated to be between 26 percent and 27 percent.

Through the interest rate hike, China hopes to rein in fixed asset investment and cool down the economic boom by bringing more market forces into its macro control.

"There was a marginal slowdown in July, showing the effect of macro control policies, but it's still high and requires consolidation," said Wang

This slowdown may be temporary and rebounds are likely to happen, said the economist.

Wang believes that local governments are determined to invest. They may be reined in temporarily after forceful measures from the central government but the desire is still there.

If no firm and effective measures are taken, a rebound is possible, he said.

Yi Xianrong, economist with the Chinese Academy of Social Sciences, said that the most crucial point in macro control is to let the price mechanism play a bigger role.

If the interest rate is not raised, investment will rebound fast, said Yi.

Officials with the central bank explained that the interest rate hike is aimed at rationalizing growth of investment, money supply and loans.

The government must adhere to macro control policies and can not loosen its control, said Wang.

Economists note that the central government has made a series of new currency policies this year but they have all been moderate. They believe the recent interest rate hike is also only a small step which shows that the central government wants to maintain steady economic growth while trying to rein it in.

Source: Xinhua