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SCMP Reporter

China's central bank announced yesterday it would raise the required reserve ratio for lenders by 0.5 percentage points to cool a fast-growing economy and curb speculation on stocks and properties.
Banks must set aside 13.5 per cent of their deposits from November 26 to 'strengthen liquidity management in the banking system and curb the excessive growth of credit', the People's Bank of China said on its website.
The increase in the bank reserve ratio, the ninth  this year, brings the ratio to a record high.
The central bank has  raised  the ratio once a month,   except in March and July, since the beginning of  the year in an effort  to  stop cash flowing into the financial system.
The mainland's   economy grew 11.5 per cent in the third quarter while the inflation rate was 6.2 per cent in September.
Analysts generally expect inflation will rise to 6.4 per cent or higher in October.
The benchmark CSI 300 Index, which tracks the 300 most representative stocks on the Shanghai and Shenzhen A-share markets, has  climbed a staggering 147 per cent this year.
'Increasing reserve requirements is the most efficient way to manage the excess liquidity coming from the trade surplus every month,'  JPMorgan chief China economist Frank Gong was quoted as saying by Bloomberg.
'If inflation continues to surprise on the upside, the central bank may need to raise interest rates.'
The central bank expects the mainland's economy  will grow at a blistering  11 per cent pace this year while inflation  will rise by 4.5 per cent, according to its latest report  on Thursday.
In addition to lifting the reserve ratio, it has raised  benchmark interest rates five times this year  and sold bills to soak up cash from the financial system.
Nevertheless, the one-year key deposit rate stands  at 3.87 per cent, lagging far behind inflation.
The resulting negative real interest rate environment draws  mainlanders to the real estate market, which in turn speeds up  economic growth and inflation.
House prices in major cities increased 8.2 per cent in the third quarter from a year earlier, accelerating from 6.3 per cent in the second quarter, figures released by the National Development and Reform Commission showed.
Prices of new flats jumped 10 per cent year on year in September, 1 percentage point above August's levels.
Also, fixed-asset investment in urban areas climbed 26.4 per cent year on year in the first three quarters of this year, outpacing the 24.5 per cent annual growth  last year.
Economists  believe a further rate  rise and increase in the bank reserve ratio are in the pipeline.
The Industrial and Commercial Bank of China said it expected Beijing might  increase the benchmark interest rate  a further 27 basis points before year's end and that the required reserve ratio for lenders might be  boosted to reach 15 per cent  next year.
China International Capital Corporation said it was also  anticipating interest rate   increases of between 27 to 54 basis points before the end of this year.
Forced saving
The increase in banks' required reserve ratio is the ninth this year
From November 26, banks must set aside a record percentage of deposits of 13.5%



Reserve ratio for banks raised again in move to curb cash flow