Page last updated at 16:46 GMT, Tuesday, 12 January 2010

China's central bank moves to curb overheating economy

Man holding lots of yuan
Banks must now hold back more of its deposits as reserves

China's central bank has stepped in to curb lending in its banking system.

Chinese banks must now keep more money back in reserves, the first such increase since June 2008, thereby taking cash out of the economy.

Chinese Premier Wen Jiabao recently urged banks to curb lending, saying they needed to be "more balanced".

China is concerned about inflation and potential asset bubbles - in stocks and property - forming in its booming economy.

The People's Bank of China also raised the interest rate on its one-year Treasury bills, another move designed to remove money from the system.

The central bank has issued a series of calls recently to banks to moderate their lending.

Monetary policy

"It would be good if our bank lending was more balanced, better structured and not on such a large scale," Mr Wen said recently, according to the Xinhua news agency.

The new moves came a day after state media reported that the banks had extended 600bn yuan ($88bn, £54bn) in loans in the first week of January.

China had employed what it called a "moderately loose" monetary policy over the past year to keep the economy growing amid the global downturn.

Economic growth is not the worry for China that it is for many other parts of the world, particularly developed nations.

The country has announced it is targeting economic growth of 8% this year.



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