BEIJING – China has ordered banks to raise the amount of money they hold in reserves for a third time this year in a new effort to dampen inflation pressures in the world's third-largest economy.
The measure, announced Monday, comes as the government tries to cool a credit boom without raising interest rates, which might slow China's economic rebound. Economic growth surged to 11.9 percent in the first quarter of the year and the government is trying to cool a surge in housing and other prices fueled by massive bank lending.
The People's Bank of China told banks to increase reserves by half a percentage point to 17 percent of their deposits for large institutions and 14 percent for most others.
The bank gave no explanation but analysts said it was trying to rein in rapid growth in China's money supply following an upsurge in inflows of speculative "hot money."
Such investors are hoping to profit from a rise in Chinese asset prices in foreign currency terms if Beijing loosens exchange rate controls and allows its yuan to gain against the dollar, which many expect in coming months.
The flood of money coursing through the economy pushed up politically sensitive housing prices by 11.7 percent in March over a year earlier.
"The government's campaign against property speculation is now center stage," said Mark Williams, of Capital Economics in London, in a report.
Beijing might increase bank reserves as often as once a month for the rest of the year while avoiding interest rate hikes until it sees how well the measure is working, Williams said. |
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