Mumbai: China has raised the reserve ratio for banks for a third time this year bringing it to nine per in a bid to curtail an investment boom fuelled by rising bank credit. Announcing this on its web site, the Beijing-based People's Bank of China said the move would cut the amount of money available with banks for lending.

China, the world's fastest- growing major economy, directed banks to set aside nine per cent of deposits as reserves starting November 15, up from 8.5 per cent, in a move to cool an overheated economy.

China's central bank, which has raised interest rates twice since April this year, wants to prevent cash generated by a record trade surplus from channeled into investments.

China has vowed to keep tabs on excessive lending by banks to cool a spending spree after the World Bank warned could lead to overcapacity and falling profits.

Investments in China has been rising at around 40 per cent of GDP – almost triple the pace of overall growth since 2003. This rate of growth, which the government feels unsustainable, has created huge increase in capacity' that's aggravating problems of excess production, according to China's ministry of commerce.

The investment boom has been aided by China's ballooning trade surplus. China, the world's third-largest exporter, reported its second- largest trade surplus in September, taking the total for the first nine months to $110 billion and topping last year's total.

The ministry of commerce forecasts the trade surplus to reach $150 billion this year. China is also sitting the world's largest foreign exchange reserve for any country. China's foreign exchange reserves have doubled in the past two years. At the end of September its reserves stood at $988 billion, making it the world's largest, as the central bank bought foreign currency to prevent the yuan from rising.

Yet, the People's Bank of China has not been able to mop up enough yuan to give more flexibility to the domestic unit.

The central bank raised benchmark lending and deposit rates simultaneously for the first time in two years about three months back. It also lifted the lending rate in April. Banks' reserve ratio requirement was increased in July and August, by a half-point each time.