China raises bank reserves to contain inflation

[June 14, 2011]  SHANGHAI (AP) -- China's central bank Tuesday lifted the ratio of funds that banks must set aside as reserves by a half point as it attempts to contain rising inflation.

The increase to the reserve requirement ratio by the People's Bank of China was the sixth this year. It comes hours after the government said that consumer prices rose 5.5 percent in May to a nearly three-year high.

The increase in the reserve ratio to a record 21.5 percent of deposits will take effect June 20, said a notice on the central bank's website.

Stubbornly high inflation has frustrated communist leaders who have declared taming surging living costs their priority this year.

They have raised interest rates four times since October and ordered companies to restrain price rises.

[Associated Press]

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