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BEIJING - CHINA'S central bank announced on Saturday it will raise the bank reserve ratio requirement by a full percentage point to 14.5 per cent on Dec 25.
The People's Bank of China made the move 'in order to strengthen the management of liquidity in the banking system and curb the excessive growth of credit', it said in a statement on its website.
State-run Xinhua news agency called the new rate an all-time high.
The rise in the requirement, the 10th this year, had been widely expected following exceptionally strong recent economic growth and inflation data and a government vow last week to adopt 'tight' fiscal policies.
China has used the ratio increases, plus a series of interest rate hikes, this year to try to slow a roaring stock market and furious economic growth to prevent overheating.
The reserve ratio requirement is the amount of money that commercial banks must hold in reserve. Raising it reduces the amount of money flowing through the economy.
On Wednesday, a top government economic gathering announced a policy shift in 2008 to 'tight' monetary measures from its long-standing 'prudent' stance.
The central bank announcement said the reserve ratio move was made 'to carry out the Central Economic Work Conference's decision to adopt a tight monetary policy'.
The conference, the most important economic gathering of the year, also made curbing inflation a priority for 2008.
China has expressed increasing alarm about inflation, which is expected to shoot to a 10-year high of up to 4.6 per cent this year, a level at which most families start feeling an erosion of purchasing power.
Hundreds of millions of Chinese still get by on meagre incomes while millions more live in abject poverty.
China's economy is widely expected to expand by as much as 11.5 per cent in 2007, making it the fifth consecutive year of double-digit economic growth. -- AFP
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