China ordered banks Friday to increase reserves for a second time in a month to cool a credit boom without resorting to interest rate hikes that might derail a recovery in the world's third-largest economy.
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 economic growth 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.
The move was in line with expectations that Chinese authorities were trying to control credit and keep the recovery on track, analysts said.
But it still sent European bourses and Wall Street stock futures into the red.
"The message coming out of China in recent weeks has been quite clear — policymakers are becoming more concerned about containing inflationary expectations and managing the risk of asset price bubbles as a result of last year's aggressive expansion of credit," Jing Ulrich, JP Morgan's chairwoman for China equities, said in a report.
"We have already seen some scaling back of incentives that have spurred record sales in the domestic property sector and authorities have made clear that they will step up scrutiny of property lending to curb 'overly rapid' price gains in some cities."
The government reported Thursday that January bank lending rocketed to 1.4 trillion ($200 billion) — nearly one-fifth of the planned 2010 total. That was despite a Jan. 12 order to banks to raise reserves, also by 0.5 percent, and repeated commands to keep lending at sensible levels.
Also Thursday, the government said the rise in housing costs in 70 Chinese cities accelerated in January, jumping 9.5 percent from a year earlier, up 1.3 percentage points from December's growth rate.
Land prices surged by 106 percent last year, according to Standard Chartered Bank, and Chinese newspapers are filled with reports of well-heeled investors paying record prices for luxury apartments and villas.
Commercial banks have said they will tighten controls on lending.
The country's biggest lender, Industrial & Commercial Bank of China Ltd., said this week it will reject loans to real estate and industrial projects deemed too dirty, energy-intensive or unnecessary.
Banks are expected to scale back lending to roughly 7.5 trillion yuan ($1.1 trillion) this year, after handing out some 9.5 trillion yuan ($1.4 trillion), the industry's top regulator, Liu Mingkang, said last month.
Analysts say Beijing's move in raising reserves while leaving the total loan target for the year unchanged indicates it will let banks lend the full amount but is trying to force them to smooth out lending over the year instead of making the bulk of loans in the first few months as they usually do.
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