Breaking News-RTRS-WRAPUP 2-China c.bank surprises with yield hike, stocks tumble

SHANGHAI, Jan 7 (Reuters) - China's central bank surprised markets on Thursday by raising the interest rate on its three-month bills for the first time since August, intensifying its grip on liquidity a day after it promised to keep credit growth in check.

While analysts said the move was just a withdrawal of surplus cash in the system, markets feared the worst, taking it as a sign the central bank could be getting ready to use more forceful measures to cool growth and fight inflation, such as raising benchmark lending rates.