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Last Updated: Monday, 19 June 2006, 11:59 GMT 12:59 UK
China to stem 'excessive' credit
A worker stands in front of containers at China's new Yangshan deep water port
Critics say Chinese exporters have an unfair advantage
China's central bank has said it will strive to stop the "excessive" availability of credit and money.

The bank made the announcement following a quarterly monetary policy meeting, but gave no further details.

There are fears that unfettered economic growth could lead to growing inflation in the economy.

The news comes after the central bank unexpectedly said last week that it would require banks to increase their financial reserves by 0.5%.

Increasing credit and, therefore, investment in China could risk destabilising the world's fastest-growing major economy.

Currency control

To counter this, bank said it would "strengthen the management of liquidity in the banking system and further restrain excessive growth in money supply and credit".

The yuan would remain balanced and its exchange rate decided by supply and demand requirements, it added.

While the yuan has increased in value by 1.3% over the past year, critics say it is still undervalued, thereby creating an unequal playing field.

China's trading partners complain that they are flooded with cheap Chinese exports, making it impossible for domestic rivals to compete.

The central bank has acknowledged that the growth of credit, as well as a growing trade surplus, necessitates a tighter monetary policy.

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