China has told its biggest banks to increase reserves in a new move to control lending, news reports said Tuesday, as Beijing tries to cool inflation and housing prices without derailing its recovery from the global slump.
There was no government announcement, but Goldman Sachs said its researchers received confirmation of the order from bank employees. Phone calls to the central bank's press section were not answered.
The top six state-owned Chinese lenders were told to increase reserves by 0.5 percentage points to 17.5 percent of their deposits, the Beijing News and other newspapers said, citing unidentified bank employees.
China's rapid growth is easing after hitting 10.3 percent in the second quarter but inflation is creeping up and Beijing is trying to control housing prices that surged earlier amid a credit boom.
The reserve hike "is used as a clear signal to commercial banks that the central bank is willing to take actions to control lending," said Goldman economists Yu Song and Helen Qiao in a report.
Chinese banks were ordered to step up lending in support of Beijing's stimulus, which helped China rebound quickly from the global crisis. But regulators tightened controls early this year after the credit boom fueled a surge in stock and real estate prices, prompting concerns about dangerous price bubbles.
The communist government imposed lending curbs and raised reserve requirements but has avoided a rate hike that it worries might derail China's recovery.
The latest reserve hike would take about 200 billion yuan ($29 billion) out of the pool of money for lending, a relatively small amount, according to Yu and Qiao.
The decision to avoid more severe steps "may also reflect the significant uncertainties facing the economy and disagreements among the views of policy makers," they said.
The reserve hike also might be an attempt to cool a surge in inflows of foreign capital attracted by China's rebound and the strengthening of its yuan against the U.S. dollar, Nomura said in a report.
According to the news reports, banks affected by the order are China's "big four" — Industrial & Commercial Bank of China Ltd., Bank of China Ltd., China Construction Bank Ltd. and Agricultural Bank of China Ltd. — and two smaller institutions: China Merchants Bank Ltd. and China Minsheng Bank Ltd.
The six institutions account for 55 percent of China's bank deposits, according to Credit Suisse.
The government says banks will be allowed to lend a total of 7.5 trillion yuan ($1.1 trillion) this year, down from a record 9.6 trillion yuan ($1.4 trillion) in 2009.
Beijing raised reserve requirements this year, boosting them to 17 percent in May for big banks. Smaller lenders are required to keep 14 percent of deposits in reserve.
Inflation rose to 3.5 percent in August over a year earlier and private sector economists say it probably climbed further in September, while third-quarter growth is estimated to have eased to 9 to 9.5 percent. Official data are due out later this month.
Bank lending has been rising in recent months at an 18 percent rate compared with a year earlier.
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