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Last Updated: Friday, 18 August 2006, 11:25 GMT 12:25 UK
China ups rates to cool economy
Chinese steel worker
China's economic growth remains red hot
China has raised interest rates for the second time this year, as it continues efforts to cool its booming economy.

The central bank increased the main lending rate by 0.27% to 6.12%, in an effort to slow down a surge in construction and credit.

With the Chinese economy growing at 11.3% in the second quarter, Beijing is worried about a big rise in inflation.

The People's Bank of China also increased the main deposit interest rate by 0.27% to 2.52%.

Decade-high growth

"It's necessary to use interest rates as a lever to curb investment and demand for credit while mopping up liquidity," said the central bank.

The last increase in the lending rate, also by 0.27%, was in April.

China is keen to keep inflation in check, as it fears a big upsurge could spark a financial crisis.

Chinese Prime Minister Wen Jiabao said recently that officials must "resolutely control" the surging investment boom.

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