RECENT interest rate increases designed to cool China's overheated economy seem to be having a mixed effect, attracting more savings into the state-run banking system but doing little to dull the appetite of Chinese government-owned corporations for loans. Bankers reported long queues of depositors forming after the interest rate increases came into effect on May 15. By last Wednesday savings at the Industrial and Commercial Bank of Beijing had jumped by 172 million yuan (HK$232 million at official rates), the China Youth Daily said in a round-up on the effects of the interest rate hikes. The newspaper said that a senior consultant at Beijing's Wangfujing Savings Bank, the largest savings bank in Beijing, had been inundated with inquiries from depositors after the increases, and fainted at his post from exhaustion. But, to a large extent, Chinese have simply been drawing deposits out of the banks and putting them into new accounts fetching the new higher interest rates. Surveys done at a number of banks indicated 60 to 70 per cent of business involved simply switching money from old deposits into new accounts yielding higher interest rates. While inflation in the major cities of China edged up to 17 per cent, the previous interest rate on a one-year deposit account was 7.56 per cent. The paper noted that even the current 9.18 per cent rate could not match inflation. Consumption, meanwhile has been booming, feeding inflation. For example, Beijing residents' spending on housing, interior decoration, telephone installation and calls, and clothing has jumped by between 50 per cent and 1,500 per cent over the past year. Bankers also complained that the country's new capital markets were sucking money from the state-run banking system. In the first quarter of this year, deposits at the Beijing Industrial and Commercial Bank were 600 million yuan lower than a year ago. There is now talk of re-introducing an interest rate regime linked directly to the rate of inflation, according to the China Youth Daily. An increase in loan rates by less than one point seems to have done little to curb demand for funds. In Jinan, Shandong province, an Industrial and Commercial Bank official was quoted as saying that enterprises craved loans no matter how high the interest rates. ''What state-run enterprise cares about how high the interest rate?'' he asked. ''They only care whether they can get a loan. As long as they can get a loan, they rush for it even if they have to pay as much as 20 per cent interest.'' He added: ''Only private entrepreneurs care about the interest rate.''