Sat, Nov 04, 2006 - Page 12 News List

PRC central bank seeks to cool economy


China's central bank yesterday ordered major commercial banks to set aside more money in reserves in an effort to curb excessive lending and help cool the economy.

The People's Bank of China said in a statement the required deposit reserve ratio for commercial lenders would on Nov. 15 rise 0.5 percentage point to nine percent, the third such move this year.

"Since the beginning of the year, the People's Bank of China has used a combination of monetary tools to soak up liquidity in the banking system," the central bank said in a statement on its Web site.

"This has gone some way towards slowing down the growth in excess liquidity," it said.

It added that China still has excess liquidity in its banking system, attributing it mainly to an imbalance in the nation's international payments.

Large amounts of funds enter the Chinese economy daily in the form of export earnings and investment money, putting upward pressure on the yuan.

The central bank's move came after data showed local banks stepped up their lending in September compared with August, marking the second consecutive month-on-month increase.

New loans in September totaled 220.1 billion yuan (US$27.9 billion), after 187.5 billion yuan in August and July's 171.8 billion yuan, central bank statistics showed.

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