BEIJING: China's central bank said Friday that it would raise lenders' required reserves by 50 basis points, the third time this year and the sixth since November. The move increases the required reserve ratio for the country's biggest banks to a record 20.0 percent, another step in the government's campaign to control inflation. It will lock up about 350 billion yuan of cash that banks would otherwise have been able to lend, making it an important tool for slowing money growth. The increase will catch many investors off guard after several prominent economists predicted this week that the central bank would take some time to gauge the impact on China of Japan's devastating earthquake and tsunami. What's more, more aggressive open market operations by the People's Bank of China had led people to believe that it could afford to put tightening on pause. "It is a fairly surprising move as the central bank has been quite successful in issuing central bank bills in the last couple of days," said Xu Biao, an economist with China Merchants Bank in Shenzhen. Chinese consumer price inflation rose 4.9 percent in the year to February this year, level with January's pace. Inflation is likely to tick up in coming months because of a lower year-on-year base of comparison. In a short statement posted on its website, the People's Bank of China said the increase will be effective March 25.
