More Reserves Urged in China To Cut Inflation
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
China ordered banks to set aside more money as reserves for the seventh time in 11 months to try to prevent the world’s fastest-growing major economy from overheating.
Lenders must put aside 11% of deposits starting May 15, up from 10.5%, the central bank said on its Web site.
Premier Wen is trying to stop a flood of cash from an export boom from fueling wasteful investment, inflation, and a stock market bubble. China’s benchmark share index has rebounded 41% after the February 27 plunge that sparked a global equities rout.
“The next steps for the central bank are to raise interest rates and allow the yuan to appreciate faster, possibly by widening the trading band,” an economist at Barclays Capital in Hong Kong, Huang Haizhou, said. “The tightening so far has done little to curb liquidity.”
Economic growth accelerated to 11.1% in the first quarter from 10.4% in the previous three months, driven by a trade surplus that almost doubled to $46.4 billion.
Inflation reached a more than two-year high of 3.3% in March.
