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CHINA / National |
Bank reserve ratio raised to cool investment(Agencies)Updated: 2007-04-29 12:52
China raised the amount of money banks must hold in reserve for the fourth
time this year Sunday, reducing the amount available for lending in a new effort
to cool an investment boom.
The amount of reserves that lenders must keep with the central bank was
raised 0.5 percentage point to 11 percent of their deposits, the People's Bank
of China said. The increase takes effect May 15.
The central bank has been struggling to mop up a torrent of cash stemming from China's record trade surplus, which doubled in the first quarter of 2007 from a year earlier, and from capital inflows betting on a stronger yuan. Policy makers are also concerned that the ready availability of cheap money
is fuelling an unsustainable rally in the domestic stock market, which has risen
40 percent this year on top of a 130 percent leap in 2006. China's foreign exchange reserve reached US$1.2 trillion by the end of March, up 37.36 percent from the same period last year, maintaining the largest in the world since the end of February 2006. Li Xiaochao, spokesman of the National Bureau of Statistics, said recently that China's economy faces the risk of shifting from relatively fast growth to over-heating. Li acknowledged that the Chinese government would take more small steps rather than drastic cooling measures to ensure a stable and fast economic growth.
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