In its bid to contain rising inflation, the central bank has raised the reserve requirements 12 times and the interest rates six times since last year.
However, Justin Lin Yifu, the World Bank's chief economist, said interest rate rises would be more desirable than raising reserve requirements.
"Raising the reserve requirements would make getting loans difficult for small and medium-sized enterprises, which play a more important role in providing employment than large enterprises," he said early in March. "Interest rate rises would not invite an inflow of overseas hot money, for China has not opened its capital account."
China's central bank governor Zhou Xiaochuan said early this month there was room for interest rate increases, but domestic and international factors needed to be considered before an adjustment.
"China has many domestic factors to be considered in interest rate adjustments."
Chinese shares sank on Tuesday amid persistent concerns over tighter policies and a possible economic slowdown resulting from a US recession, with almost all stocks closing lower.
The benchmark Shanghai Composite Index went down 3.96 percent to end 3,668.90 on Tuesday, the lowest point in about eight and a half months.
(Xinhua News Agency March 19, 2008 )
