Fri, Sep 07, 2007 - Page 11 News List

Beijing renews attempt to cool investment boom


China raised the amount of money its banks must hold in reserve for the seventh time this year yesterday, reducing the amount available for lending in an effort to cool an investment boom.

The reserve requirement ratio will rise 50 basis points to 12.5 percent for most commercial banks, the People's Bank of China said.

The move will take effect on Sept. 25, it said in a statement posted on its Web site.

The bank said the move was made "in order to strengthen the administration of the liquidity of the banking system and to curb rapid growth in credit."


The order came on top of repeated interest rate hikes and investment curbs imposed on real estate, auto manufacturing and other industries in an effort to cool a boom that Chinese leaders worry could ignite inflation or a financial crisis.

It also followed the recent release of government figures on inflation.

The inflation rate in the January to July period hit 3.5 percent, driven by the sizzling economy and a 15.4 percent surge in the price of pork and other food items over the same period a year earlier.


Consumer prices soared 5.6 percent in July over the same month last year -- the highest monthly inflation rate since February 1997.

The central bank said last week it expects the inflation rate for the year to exceed the government's 3 percent target.

The reserve rate increase took effect on Aug. 15.

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