China Steps Up Inflation Fight with Bank Reserves Hike

By Kumar, Nikhil | The Independent (London, England), April 18, 2011 | Go to article overview
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China Steps Up Inflation Fight with Bank Reserves Hike


Kumar, Nikhil, The Independent (London, England)


China stepped up moves to head off inflation yesterday by raising bank reserve requirements for the fourth time this year.

The move, which comes after an increase in benchmark interest rates at the start of April, is the seventh since Chinese monetary authorities began tightening policy in October.

The 50-basis point rise will come into force on Thursday, and takes the required reserve ratio for China's biggest banks to 20.5 per cent.

It follows figures showing the Chinese economy expanded by 9.7 per cent in the first three months of the year, while consumer inflation soared to a 32-month high of 5.4 per cent in March, from 4.9 per cent in the first two months of the year.

The jump in consumer prices was the fastest since July 2008, and above forecasts of a rise to 5.2 per cent. The pace of economic growth was down from the 9.8 per cent expansion seen in the final three months of 2010 but ahead of forecasts of 9.5 per cent.

"This rise continues the tightening measures of the central bank. The first quarter GDP shows that the whole economy is good, so there is still space for tightening," Lin Songli, an economist with Bejing's Guosen Securities said.

Zhu Jianfang, chief economist at Citic Securities in Bejing, said further monetary tightening remained on the agenda, though interest rate rises might not be forthcoming this month.

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China Steps Up Inflation Fight with Bank Reserves Hike
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