CHINA said yesterday it will ask commercial banks to freeze more money from lending to control liquidity and fight inflation.
The reserve ratio - the amount of money a bank must put at the central bank - will rise 0.5 percentage point to 16 percent on yuan deposits on April 25, the People's Bank of China said on its Website yesterday.
The rise is the third move this year by the central bank. It raised the ratio 10 times in 2007.
The increase didn't come as a surprise after China yesterday released a spate of economic figures which showed the economy growing robustly and inflation was still at a high.
The consumer price index, the main inflation gauge, rose 8.3 percent in March, decelerating from February's 8.7 percent. China's economy rose 10.6 percent in March while industrial production jumped 17.8 percent in March.
"The National Bureau of Statistics released a slew of data with every measure exceeding market consensus forecasts," Matt Robinson, a Moody's Economy.com economist, said yesterday.
Robinson described the figures as "plenty of fire still in the dragon's belly."
"The ratio increase is expected as the economy is still in a fast track, indicated by the latest economic data," said Lu Zhengwei, an Industrial Bank analyst. "But it is hard to predict how many more times the reserve ratio will be raised this year as it depends on how fast the economy is developing."
China's money supply grew 16.3 percent in March, the slowest pace in more than a year, signaling moves to curb liquidity are bearing fruit.
However, economists have already said that the March slowdown may not lead to a loosening of the tight monetary policy.
Deutsche Bank's Ma Jun, who predicted a March inflation of 8.2 percent, has said uncertainties imply a looser monetary policy is unlikely in the near term.
Moody's Economy.com's senior economist Virendra Singh said inflation will be a major issue, with the government using a combination of market and non-market moves to tame prices.