Chinese banks ordered to increase reserves

[November 10, 2010]  BEIJING (AP) -- Chinese banks were ordered to set aside more reserves Wednesday in a new move to curb lending amid concern about rising inflation.

The central bank's order comes as Beijing tries to contain rising housing costs and consumer prices that increased by 3.6 percent in September, exceeding the official target of 3 percent.

Banks were told to increase reserves held at the central bank by 0.5 percent of their own deposits to shrink the pool of money available for lending. The total level after the order would vary by institution, but could be as much as 18 percent of deposits.

Beijing raised its key interest rate on Oct. 19 for the first time since the financial crisis. That move came after lending by Chinese banks surged in September in defiance of orders to keep credit growth stable.

The government is due to report consumer prices for October on Thursday and analysts expect inflation to surge above 4 percent.

___

People's Bank of China: http://www.pbc.gov.cn/

[Associated Press]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.