Mumbai:
China has ordered an increase in the cash reserves of
deposits against lending by banks for the sixth time in
less than a year to rein in inflation and investment in
the world''s fastest-growing economy.
China''s central bank, The People''s Bank of China, raised
the deposit reserve ratio by 0.5 percentage point to 10.5
per cent starting April 16, a statement on its web site
said.
The central bank is keeping up its relentless pace of
monetary tightening by ordering banks to tie up more of
their deposits in reserve instead of lending them out.
It
was the third increase in reserve requirements so far
this year and came less than three weeks after the central
bank raised benchmark interest rates to try to keep the
world''s fourth-largest economy on an even keel.
The central bank is striving to mop up cash spun off from
China''s record trade surplus, which tripled to $39.64
billion in the first two months of 2007, compared with
the same period a year earlier.
"The People''s Bank of China will continue to implement
stable monetary policy, use different tools to enhance
liquidity management in the banking system, keep liquidity
at an appropriate level and avoid excessive growth in
the money supply and credit," the central bank said
in a statement.
A 0.5 percentage point increase removes about 170 billion
yuan ($22 billion) from the financial system, reducing
the funds banks have available to lend.
China''s economy may grow as much as 11 per cent in the
first quarter, the State Information Center said in a
report last month. The center is a research unit of the
National Development and Reform Commission, the government''s
top economic planning agency.
Money
and credit growth rose sharply in January and February,
reviving fears of a reacceleration in investment in fixed
assets such as factories and flats that would undermine
a year-long central government drive to curb wasteful
capital spending.
China
had raised bank reserve ratios on February 25. The central
bank lifted the benchmark one-year lending rate to 6.39
per cent from 6.12 per cent on March 18.
The
central bank prints yuan to convert foreign currency derived
from exports of clothes, electronics and steel. It then
sells treasury bills to lenders to remove money from the
financial system.
That
tool is less attractive to the government than lifting
bank reserve
requirements because it costs more. The People''s Bank
of China pays lenders 1.89 per cent interest for reserves
lodged with it, less than the yield on one-year government
paper.
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