BEIJING - China stepped up efforts Friday to cool its sizzling economy by
tightening bank credit for the fourth time in seven months.
The central bank raised the amount of money that banks must hold in reserves,
cutting the pool available for lending. The government worries that runaway
investment in real estate and other assets, fueled by easy credit, could ignite
inflation or a debt crisis.
The latest measure follows curbs imposed last week on investment in China's
booming auto manufacturing industry and earlier controls on real estate and
Banks' reserve ratio will rise by 0.5 percent points on January 15, the
central bank said. That increases the amount they must deposit with the
government to 9 percent of their deposits.
The economy grew by 10.4 percent in the third quarter of 2006, down from 11.3
percent the previous quarter. Economists say growth for the full year, due to be
announced soon, should be about 10.5 percent.
The government raised interest rates twice last year and shrank the amount of
money available for lending by raising the reserve ratio in June, July and
November and forcing banks to buy billions of dollars in bonds.
Economic officials also have imposed curbs on land use and banned outright
some types of real estate projects.
In auto manufacturing, where officials say capacity outstrips demand,
controls announced December 26 require producers to show they are selling at
least 80 percent of vehicles they are authorized to make before they can expand
Chinese officials say the controls are starting to take effect, but they have
warned that investment in industries such as auto manufacturing is still surging
The central bank did not say how much money would be removed from the economy
by its latest measure. But it said last year that a similar 0.5 percentage point
increase in the reserve ratio drained 150 billion yuan (US$18.8 billion;
euro14.6 billion) from China's markets.