China interest rates likely to rise: PBOC governor

China's borrowing costs will have a tendency to rise once controls on interest rates are lifted due to buoyant demand for funds, Zhou Xiaochuan, governor of the People's Bank of China, said on Monday.

Zhou said in an interview with Caijing magazine that elevated interest rates will be a "unique trait" of China's economy as rapid development in the world's second-largest growth engine keeps borrowing costs high.

"The future point of equilibrium for the price of credit will be decided by total supply and total demand," Zhou was quoted as saying in the financial magazine.

"Relatively speaking, the total demand for credit in China at present is biased toward the large side...," he said. "Under such a circumstance, the point of equilibrium for the price of credit will be biased upward."

The government says it is determined to eliminate State control over the level of rates to address criticisms that official interference with the cost of funding distorts the economy and encourages an inefficient use of funds.

China's latest plans to change its economic strategy also stresses the need for local governments to take responsibility for debts they have incurred, Zhou said, while possibly allowing them to use new channels to raise funds.

He said China would take precautions to control risks from financial liberalization.