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%