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Thursday, May 12, 2011

China raises bank reserves to cool inflation


BEIJING -- China ordered the majority of its banks on Thursday to raise the amount of money they hold in reserves in a new move to restrain inflation after higher-than-expected price rises in April.
The central bank's order was the fifth reserve boost this year and came a day after the government reported April price increases was 5.3 percent.
Obstinately high inflation has aggravated communist leaders who have affirmed humanizing rolling living costs their main concern this year. They have raised interest rates four times since October and ordered companies to restrain price rises.
The People's Bank of China ordered most banks to augment reserves by 0.5 percent of their deposits as of next Wednesday. That will increase reserves for the biggest institutions to 21 percent of deposits.
Economists blame China's price rises spike on strong customer demand that is outstripping food provisions and a flood of bank lending that was part of Beijing's incentive following the 2008 global disaster.
China's investments are rising so fast that economists regard increases in reserve levels and interest charges as only a signal to institutions to cut back lending.
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