Head of Hong Kong's monetary authority Friday welcomed the decision made by the Chinese central bank to raise lending rates, believing it will help reduce over-investment and production.

 

The decision is helpful to keep the mainland economy growing in a normal pace and cut down the risk of overheating, Joseph Yam, chief executive of the Hong Kong Monetary Authority, told reporters.

 

Starting from Friday, the People's Bank of China raised its one-year loan rate from 5.58 percent to 5.85 percent.

 

The move is to "further consolidate the macro-control effects, keep in place a sound trend in the sustained, fast-paced, coordinated, and healthy development of national economy and continue to let economic means play a role in resource allocation and macro-control," said a statement issued by the central bank.

 

Yam, however, warned Hong Kong people of a volatile market following mainland's rates hike and the United States policy on rates.

 

The US Federal Reserve chairman Ben Bernanke hinted on Thursday that the US may pause in its cycle of interest rate increases.

 

"The information from the two sides will create more market volatility, and it's necessary to warn (Hong Kong) citizens of risk," said Yam.

 

(Xinhua News Agency April 29, 2006)