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Banks' reserve ratio raised to 13 per cent
Beijing has raised banks' reserve requirements by half a percentage point to 13 per cent, the eighth such increase this year, in a bid to rein in lending growth.
But analysts said they expected the latest measure would have little impact on the sizzling stock and real estate markets.
Banks would have to set aside 13 per cent of deposits as reserves from October 25 to curb overheating in loan growth, the People's Bank of China announced on its website yesterday.
The central bank also increased the reserve ratio by half a percentage point in the seven previous increases this year. But the economic growth rate hit a blistering 11.9  per cent in the second quarter and the Shanghai A-share index surged to a fresh high last week.
Linus Yip Sheung-chi,   a strategist for First Shanghai Securities, said: 'Beijing would not want to put forward drastic measures to cool down the economy, but still wants to show the market that it is concern about inflation.'
Increases in bank reserves usually work in tandem with interest rate increases and Mr Yip predicted that the mainland might raise rates again this month when economic data including the latest consumer price index figures were released. If the central bank does increase interest rates it would be the sixth such move this year.
The mainland's consumer price index rose 6.5  per cent year on year in August, the biggest jump since December 1996.
The mainland's trade surplus, bank lending and foreign reserves all rose last month. The trade surplus increased 56.33 per cent to US$23.91  billion, wider than market expectations. The widening trade surplus boosted the country's foreign reserves to a fresh record of US$1.43 trillion, up 45 per cent year on year.
New loans in the first nine months amounted to 3.36  trillion yuan - outstripping the loan growth for all of last year.
'The reserve-ratio increase can help to optimise the distribution of capital since banks will be more prudent in selecting lending projects,' Mr Yip said.
Reuters quoted Lin Zhaohui,   an analyst with Guotai Junan Securities in Shanghai, as saying the latest move would soak up about 170 billion yuan that banks would otherwise have been able to lend out to customers.
The Chinese Academy of Social Sciences said in a report issued on Thursday  that inflation could worsen on the mainland because of surging production costs, excessive fixed-asset investment and rising commodity prices. Although pork and other food prices have been seen as the culprits behind rising inflation, they were not the underlying causes, the study said.
The central government has adopted several measures to rein in   inflation. All government-regulated prices have been frozen until the end of the year and supplies of grains, vegetables and pork have been increased.
The Ministry of Commerce said on Tuesday  that pork prices had fallen slightly during the week-long National Day holiday.
Hot money
The annual growth in broad M2 money supply on the mainland accelerated from 18.1 per cent in August. The growth for last month was: 18.5%



Beijing acts to soak up torrent  of cash