Chinese central bank orders banks to set aside higher reserves in bid to curb lending

SHANGHAI, China - For the fourth time this year, China's central bank on Monday ordered banks to set aside more reserves to curb a boom in lending.

The People's Bank of China said banks must increase the amount they must hold in reserve by 0.5 percentage points to 16.5 percent of their deposits, effective May 20, according to a notice posted on the central bank's Web site.

China has repeatedly increased the reserve ratio over the past two years to curb rapid growth in lending that regulators worry could lead to a financial crisis.

Excess investment in real estate and other assets is also viewed as one factor behind surging prices in China. The bank's announcement followed news earlier Monday that the consumer price index rose 8.5 percent in April from the same month a year earlier, an acceleration from March's 8.3 percent increase.

The move was "aimed at strengthening liquidity management in the banking system and steering reasonable growth in bank credit," the central bank said in a statement.

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