China Raises Bank Reserve Level to Cool Credit

The Associated Press reports that China has moved to limit to prevent the economy from becoming overheated:

Chinese leaders worry that a stimulus-driven torrent of lending is fueling a dangerous bubble in stock and real estate prices. They also are concerned that the flood of money surging through the economy is adding to inflation.

Beijing declared China had emerged from the global crisis after rebounded to 10.7 percent in the final quarter of 2009. But authorities say the global outlook is still uncertain, and analysts expect them to try to avoid rate hikes even as they start winding down their stimulus.

Banks were ordered Friday to increase reserves by half a percentage point — to 16.5 percent for large lenders and to 14.5 percent for smaller institutions. Rural lenders that serve farmers were exempted to guarantee adequate credit for agriculture.

February 12, 2010, 2:10 PM
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Categories: Economy, Main