China tightens monetary policy (discreetly)

The People's Bank of China raised short-term rates fractionally. This article discusses why it is such an important move for the Chinese economy especially given its relative lack of independence when it comes to affecting the monetary framework.

The two reasons that the article cites to explain why this policy is important are:
1) The expected slowing of the growth rate. Last year it was 6.7%, it is supposed to go down further this year. Also, foreign investments have been increasing at a slower pace than ever before. Though this may not sound like the ideal time to begin a "monetary tightening cycle" but this has been mostly placed to guard against a shaky housing market and increasing debt in the financial institutions

2) It is changing how China had previously dealt with monetary policies. While before they used to "set specific lending or deposit rates" and never really had an equivalent of the federal funds rate, these current changes are pointing towards tendencies similar to more developed nations.
They are being careful not to breach into the central power of influence who still has the final say on everything.

China is a socialist market system where the government owns 98% of the banking assets. The Central Bank enforces monetary and fiscal policies with the approval of the State Council. These policies work to affect liquidity. The slight increase in rates seems counter-intuitive given how it will increase the cost of borrowing, incentivize saving and reduce spending/investments and ultimately lead to lower aggregate demand which will slow economic growth further. It is interesting to see the central bank prioritizing guarding against a potential housing markets crisis using these tools, though. Higher interest rates also lead to higher mortgage interest rates which may deter consumers from buying houses on credit. Since the amount itself is small enough, it is uncertain how much it will affect overall growth, but maybe it is just enough to prevent potential crises in the housing market or financial institutions.