China's central bank ordered commercial banks Saturday to keep more money on hand, raising a key reserve requirement yet again to try to rein in the rapid lending that is fueling torrid economic growth, REPORTED AP. The People's Bank of China said the reserve requirement will be raised half a percentage point, to 13.5 percent, as of November 26. It was the ninth such increase this year. The move was intended to «strengthen liquidity management in the banking system and check excessive credit growth,» the central bank said in a brief statement on its Web site. China's economy is in its fifth straight year of double-digit growth, clocking an 11.5 percent pace in the third quarter this year compared with a year ago. At the same time, the economy is wrestling with inflation, and economists complain that growth is heavily driven by investments in factories and other fixed assets and in high-flying real estate and stock markets. If left unchecked, some government officials and economists worry that inflation, so far largely confined to food prices, could spill over into the wider economy and that hastily made loans could sour, saddling banks with higher debts. In remarks last month, central bank governor Zhou Xiaochuan said that risks of economic overheating were persisting and that his agency stood ready to make frequents adjustments to key rates. Hiking the reserve requirement means that commercial banks should retain more of their deposits, rather than lending the funds into the broader economy. Along with reserve increases, the central bank has also been notching up deposit and lending rates, with five hikes this year, to discourage lending. Despite the moves, money is flooding into China, brought in by hugely successful export industries and by Chinese and foreigners hoping to cash in on the boisterous economy, the rising value of the currency and a stock market whose main index has increased six times in value in two years. Banks have largely shrugged off the ordered increases in required reserves, and it's unclear whether Saturday's order would be any different. Awash with funds, banks have been lending rapidly, with the volume of loans up 30 percent in the first quarter from the year previous. Growth in the money supply has also shown signs of accelerating in recent months.
