The benchmark lending rate will be increased from 6.39 percent, according to 14 of 19 economists surveyed by Bloomberg News yesterday. Banks will be ordered to set aside more money as reserves at least three more times, 11 of 17 predicted.

Premier Wen Jiabao is trying to stop cash from a record trade surplus from overheating the economy, which grew at the second-fastest pace in 12 years even with borrowing costs near an eight-year high. His challenge will be to slow growth without prompting a property and stock market rout.

“The government will likely introduce another round of tightening measures very soon,” said Mingchun Sun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. “On top of a rate hike, it may include further increases in the reserve requirement ratio and more administrative measures.”

China’s GDP will grow 10.4 percent in 2007, according to the median estimate of 17 economists surveyed, up from 9.9 percent before the figures were released.

The People’s Bank of China raised borrowing costs three times and increased the reserve requirement ratio six times in the past year. The government also curbed land use, restricted project approvals and cut export rebates for steel and textiles to discourage investment.

China’s growth is “relatively fast” rather than an “overheating” because energy resources are abundant and quarterly inflation excluding food prices was unchanged from a year earlier, Li Xiaochao, statistics bureau spokesman, told reporters in Beijing yesterday.

“This is consistent with our view that the government is not overly worried about the overheating of the real economy,” said Ma Jun, senior economist at Deutsche Bank AG in Hong Kong.

Consumer prices rose 3.3 percent in March, the fastest pace in more than two years and breached the central bank’s 3 percent target for 2007. Of the 2.7 percent increase for the quarter, 1.5 percentage points was due to food, Li said.

Fixed-asset investment in urban areas climbed 25.3 percent in the first quarter from a year earlier from 24.5 percent for all of 2006. It rose 29.8 percent in the first quarter last year.

China’s benchmark stock CSI 300 Index rebounded 4.2 percent as of 1:56 p.m. in Shanghai after sliding 4.7 percent from a record yesterday on speculation rapid growth would prompt the government to raise borrowing costs. The index has gained 34 percent since a 9 percent slump on Feb. 27.

Banks are required to hold rather than lend 10.5 percent of their deposits after a 0.5 percentage point increase on April 16. Each increase of that size removes about 170 billion yuan ($22 billion) from the financial system.

“Increasing the reserve requirement takes old money out of the banking system, but soon new money arrives again,” said Chris Leung, senior economist at DBS Bank Hong Kong Ltd.

Growth in lending hasn’t cooled, with banks making 1.4 trillion yuan of new loans in the first quarter, nearly half the total for last year.

“It will take more than one imminent 27 basis point hike to puncture equities sentiment on the Chinese street,” Stephen Green, senior economist at Standard Chartered Bank Plc said in a note. “If that wealth effect spills out of the stock market, then get ready for accelerating house prices in Shanghai and beyond.”

Green expects two 27 basis point interest rate increases this year, one as soon as this month.

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