Barely a day goes by in China without a financial innovation here or a regulatory departure there. But in one important field China hews to a seemingly baffling tradition: interest rates that move by 27 basis points.

Twenty-seven basis points? What''s wrong with 25 basis points, or a quarter of a percentage point in plain English?

The answer, in part, has to do with the abacus. The convention in China is that the year, when it comes to calculating interest, has 360 days rather than 365.

So to avoid recurring decimals and rounding complications when calculating daily rates, annual interest rates and any changes have to be divisible by 360.

In practice that means they have to be divisible by nine.

"The ''divisible by nine'' rule is a long-standing practice for setting interest rates in China," Joseph Yam, chief executive of the Hong Kong Monetary Authority, wrote in a recent column on the issue on his agency''s website, http://www.info.gov.hk/hkma/.

China is not alone in working off a 360-day year for the purpose of interest rate calculations. So does the US bond market.

But, as Yam noted, the rule of nine makes it easier to calculate interest for broken dates when using an abacus than when using a calculator or computer.

"Perhaps this is why the tradition was established. Using an abacus to do division is a lot more difficult than to do multiplication, at least according to my own experience, particularly when one number is not divisible by the other.

"Although abacuses are not commonly used these days, the tradition lives on," Yam commented.

Which explains why the People''s Bank of China, the central bank, raised banks'' benchmark one-year lending rate by 0.27 of a percentage point in April, to 5.85 per cent, and why the Housing Provident Fund followed by hoisting its five-year mortgage rate by 18 basis points to 4.14 per cent.

All those figures are divisible by 9, unlike the increment of 25 that is standard elsewhere in the world.

The  "divisible by nine" rule was enshrined in accounting standards issued jointly by the central bank and the Ministry of Finance in 1993, according to Yam.

What Yam failed to mention is that the number nine, which enjoys the same pronunciation as  "longevity" in Chinese, has long been regarded as a magic number in China.

Nine, deemed the largest number in Taoism, is generally reserved for the royal family. So it is that nine-dragon paintings and sculptures are ubiquitous in Beijing''s Forbidden City, home of Chinese emperors yearning to reign forever. The palace has 9,999 rooms and its front gate is studded with nine rows of nine copper nails.

Despite the power of tradition, Frank Gong, who heads up China research at JPMorgan in Hong Kong, reckons that China might move rates by a quarter of a percentage point next time.

The benchmark deposit rate, now at 2.25 per cent, and the 5.85 per cent lending rate, are both at convenient levels that give Beijing the flexibility to choose a standard 25-basis-point increase if it wishes, Gong said.

Dong Tao, chief Asia ex-Japan economist for Credit Suisse, said China chose 27 basis points just to be different. He draws a parallel with Japan''s unique mobile telephone standard. "Either you adapt to their standard or you do not go to Japan," said Tao.

It was the same with 27-basis-point rate moves: "People accept that, because China is big enough to set a standard.

"As Yam put it, the ''divisible by nine'' rule has very much become the central bank''s trademark." - China Daily