China moves to curb inflation

The Chinese authorities have again increased the amount of cash banks must keep in reserve – raising the level to eighteen and a half percent of the money they have on deposit.

It is the third increase in a month and is intended to mop up excess cash floating around in the economy and limit inflation.

The fact the central bank has not raised interest rates suggests officials are not too worried about China’s economy overheating.

The move came just one week after China’s top leaders announced a shift to a “prudent” monetary policy from the previous “moderately loose” stance. Analysts said the change of wording could pave the way for more interest rate increases and lending controls.

Chinese stock markets have shed more than 10 percent over the past month on concerns that the government would ratchet up its monetary policy tightening in face of rising inflation.

Chinese consumer price inflation may have hit 5.1 percent in the year to November, a 28-month high, state media reported.

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