Oct. 26 (Bloomberg) -- China's central bank will probably increase borrowing costs for the sixth time this year to cool the stock market and inflation after the economy grew 11.5 percent in the third quarter.

The benchmark one-year lending rate will increase to 7.56 percent from 7.29 percent, according to 16 of 17 economists surveyed by Bloomberg News. The deposit rate will likely rise to 4.14 percent from 3.87 percent.

Inflation in September was 6.2 percent, more than double the bank's target, and the benchmark stock index has almost quadrupled in the past year. President Hu Jintao is trying to prevent a sudden slowdown that might throw millions out of work, drive up bad loans and undermine Communist Party rule.

``There are still more inflationary risks than deflationary ones,'' said Stephen Green, senior economist at Standard Chartered Bank Plc in Shanghai. ``Now is a good time for the central bank to raise rates again.''

Three economists expect rates to increase as early as today or the weekend after the government released data for the three months ended Sept. 30 yesterday. Economic growth topped 11 percent for a third straight quarter.

People's Bank of China Governor Zhou Xiaochuan said last week that steeper or more frequent interest-rate increases are possible and expressed concern at asset prices. The stock market added $2.5 trillion in value this year -- the equivalent of GDP in 2006 -- and billionaire Warren Buffett this week told investors to be ``cautious.''

Banks' Reserves

Besides higher rates, the People's Bank of China has increased the proportion of deposits commercial lenders are required to hold as reserves to 13 percent, the highest in almost a decade. In the survey, 12 of 13 economists expected the requirement to be raised again this year.

China's third-quarter expansion slowed from the second quarter's 11.9 percent, the fastest pace in more than 12 years, and inflation is down from an almost 11-year high of 6.5 percent in August.

``Despite the modest moderation in economic growth and inflation, they remain above the comfort zone for policy makers,'' said Liang Hong, senior economist at Goldman Sachs Group Inc. in Hong Kong. She expects another increase in borrowing costs this year.

Factory and property investment in urban areas climbed 26.4 percent in the first nine months from a year earlier, up from the 24.5 percent pace in all of 2006. Industrial production jumped 18.9 percent in September, the biggest increase in three months.

Widening Trade Surplus

A stronger currency would make exports more expensive and help to slow the inflow of cash from a trade surplus that widened 69 percent in the first nine months to a record $185.7 billion.

China's yuan has climbed more than 10 percent versus the dollar since the end of a fixed exchange rate in July 2005 and fallen 7 percent against the euro.

``The yuan should be allowed to appreciate faster to deal with issues associated with excess liquidity,'' said Frank Gong, chief China economist at JPMorgan Chase & Co in Hong Kong. ``The pressure is building and the argument is gaining momentum within the Chinese government.''

The yuan headed for its biggest weekly advance in a month after the Group of Seven nations called for faster gains and the Communist Party reiterated its goal of a convertible currency. The yuan rose 0.27 percent this week to 7.4844 versus the dollar as of 10:31 a.m. in Shanghai, according to Bloomberg data.

The following table shows economists' estimates for changes in the benchmark one-year lending and deposit rates and the required reserve ratio for banks.

---------------------------------------------------------
                              Lending  Deposit    Reserve
                                 rate     rate Req. Ratio
---------------------------------------------------------
Number of Estimates                17       17        13
---------------------------------------------------------
AMP Capital Investors ^            27       27        50
BNP Paribas *                27 (2-3) 27 (2-3)        50
Barclays Capital                   18       27        50
CFC Seymour *                      27       27        50
CIMB-GK Securities #               27       27    50 (2)
Citi                               27       27        --
Daiwa Institute of Research ^  27 (2)   27 (2)        50
Forecast Ltd. #                27 (2)   27 (2)    50 (2)
Goldman Sachs                      27       27        --
Hang Seng Bank                 27 (2)   27 (2)    50 (2)
Industrial Bank *                  27       27    50 (2)
JPMorgan Chase                 27 (2)   27 (2)        --
Lehman Brothers ^                  27       27        --
Natixis                      27 (1-2) 27 (1-2)        nc
Royal Bank of Scotland *           27       27    50 (2)
Shenyin Wanguo Securities          27       27        50
UOB Group #                    27 (2)   27 (2)        50
---------------------------------------------------------

Note: # rate increase as early as today or this weekend

^ rate increase within next one to two weeks

* rate increase by end of November

Numbers in parenthesis refer to the number of expected

rate hikes by end of 2007

To contact the reporters on this story:
Nipa Piboontanasawat in Hong Kong at 
npiboontanas@bloomberg.net;
Patricia Chua in Singapore at 
pchua1@bloomberg.net

Last Updated: October 26, 2007 02:04 EDT