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SHANGHAI'S key stock index plunged the most in about 10 weeks after central bank chief Zhou Xiaochuan said there is room for the nation's lending and deposit rates to increase.
The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, sank 5.62 percent, or 196.22 points, to 3,296.67 at 3pm.
This was the biggest plunge since January 28 when it lost 7.19 percent.
Losers in the Shanghai market outnumbered gainers 817 to 23, while 13 were unchanged.
The Shenzhen Composite Index, which covers the mainland's smaller stock market, was down 6.30 percent, or 67.86 points, to 1,009.16.
China's central bank chief Zhou Xiaochuan, who raised borrowing costs six times last year, said there's room for lending and deposit rates to increase to help cap the fastest inflation in more than a decade.
"The anti-inflation policy is a combination of both quantitative measures and price measures,'' Zhou said in an interview with Bloomberg News in Washington yesterday. "There's room for using interest rates further.''
Developers tumbled as higher rates will increase the cost to finance mortgages.
China Vanke, the nation's biggest developer, fell the daily cap of 10 percent to 22.92 yuan (US$3.28), its lowest in more than three months. Poly Real Estate Group Co, the nation's second-largest developer by market value, also dropped the daily cap of 10 percent to 24.30 yuan.
Industrial and Commercial Bank of China, the nation's biggest lender, dropped 5.22 percent to 5.81 yuan while China Construction Bank Corp, the second-largest, also decreased 5.72 percent to 6.92 yuan.
The Construction Bank said today that its second-half profit rose 51 percent to 34.9 billion yuan, helped by higher lending margins and rising demand for asset management services.
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