BEIJING, May 12 (Xinhua) -- China's central bank announced on Monday that it would raise the reserve requirement ratio for commercial banks by half a percentage point to curb excess liquidity and ease inflation.

    This is the fourth such move this year, and it will lift the country's reserve requirement ratio to a new high of 16.5 percent as of May 20.

    "The rise is aimed at strengthening liquidity management in the banking system and steering reasonable growth in bank credit," the People's Bank of China (PBOC) said in a statement.

    The PBOC raised the reserve requirement ratio on Jan. 25, March 25 and April 25, respectively, on top of 10 such moves in 2007. It also raised interest rates six times last year.

    The new tightening measure was unveiled on the same day as the National Bureau of Statistics announced the country's inflation rate hit 8.5 percent in April, up from 8.3 percent in March and only slightly lower than the nearly 12-year high of 8.7 percent in February.

    Experts said the rise was in expectation of inflationary pressures remaining high.

    "The reserve requirement hike is a quick response to the accelerated inflation rate for April announced this morning, indicating the central bank has been closely monitoring the figure," said Zhuang Jian, a senior economist with the Asian Development Bank mission in China.

    Fighting inflation remained the top concern of China's monetary policy makers, said governor Zhou Xiaochuan of the People's Bank of China on Saturday.

    China's consumer price index, the main gauge of inflation, has risen from above three percent in March last year, to above 6 percent in August, and to more than more than 8 percent in February, as a result of the robust national economy and domestic food price rises coupled with soaring international energy prices.

    "Monday's move to order banks to set aside more money in reserve was not only made in response to the rising inflationary pressure. It was a strict implementation of the tight monetary policy, " said Peng Xingyun, a finance researcher at the Chinese Academy of Social Sciences.

    China adopted the tight monetary policy late last year to prevent the economy from overheating and guard against a shift from structural price rises to evident inflation, and the country adhered to the policy despite a global slowdown hit by the international credit crunch.

    China's economic growth slowed in the first quarter, but remained in double digits. It expanded by 10.6 percent, compared with 11.7 percent a year ago.

    Wang Xiaoguang, a Beijing-based economist, said he expected the economy to expand 10.5 percent in the first half, adding the government still needed to cool the economy.

    Peng also believed that for the PBOC, the reserve requirement hike was an easier option than an interest rate rise due to repeated interest rate cuts in the United States. The widening gap in interest rates between the two countries would encourage more influx of speculative capital into China, adding to money supply growth pressure.

    More than 80 billion U.S. dollars in speculative funds, often in the disguise of trade and investment, moved into China in the first quarter, against 120 billion U.S. dollars for the whole of last year, according to Zhu Baoliang, an economist with the State Information Center.

    The M2, the broad measure of money supply, which covers cash in circulation plus all deposits, grew 16.29 percent by the end of March from a year ago, 0.45 percentage point lower than the end of last year. The country's banks made loans worth 1.33 trillion yuan (190 billion U.S. dollars) in the first quarter, 89.1 billion yuan less than the same period a year earlier.

    Peng expected the money supply figure for April, yet to be published, would indicate increased credit growth.

    According to the latest official statistics, the trade surplus has injected 58.08 billion U.S. dollars and foreign investment pumped 35.02 billion U.S. dollars into the nation's financial system in the first four months.

    The increased money supply also played a role in buoying up the rising inflation, and the reserve requirement hike could help slash the country's money supply, Peng added.

China's monthly CPI rebounds to 8.5%

    BEIJING, May 12 (Xinhua) -- China's consumer price index (CPI),the main gauge of inflation, rose 8.5 percent year on year in April, the National Bureau of Statistics said on Monday.

    The figure, compared with 8.3 percent in March and a nearly 12-year-high of 8.7 percent in February, was broadly in line with most forecasts. Full story

PBOC: Cutting inflation to remain top goal

    BEIJING, May 11 -- China's monetary authorities are struggling to address conflicting policy goals, but inflation will remain the top policy concern, the country's central bank governor said on Saturday.

    While the United States and other countries are more focused on fending off a recession, China's monetary policy must target inflation over growth and employment, Zhou Xiaochuan, the People's Bank of China governor, told a forum in Lujiazui, Shanghai's financial center. Full story

China keeps stable domestic grain market

    BEIJING, May 11 (Xinhua) -- Amid a major wave of international grain price hikes, China has managed to maintain stable domestic prices.

    Wheat prices on the Chicago Board of Trade surged more than 140 percent in March, and rice prices went up over 80 percent.Full story


China's producer price index up 8.1% in April

    BEIJING, May 9 (Xinhua) -- The producer price index (PPI) for China's industrial products rose 8.1 percent in April over the same month last year, putting on more pressure on the nation's inflation rate, the National Bureau of Statistics said Friday.

    The factory-gate prices of raw materials, fuel and power were up 11.8 percent. Full story

Inflation expected to go down in Q2

    BEIJING, May 7 -- Inflation could dip to 7.5 percent in the second quarter from 8 percent in the first, but inflationary pressures will stay strong because of surging grain prices and robust investment, said a top government think tank.

    "Seasonal changes and government measures to boost agricultural supplies may cause consumer prices to slide in the second quarter," the State Information Center said in a report. "But inflationary pressure is still mounting because of domestic and international factors." Full story