China's central bank said today that it would raise the amount of money banks must keep in reserve as it struggles to keep inflation under control in the world's second biggest economy.
The reserve requirement ratio will be raised by 50 basis points from February 24, the People's Bank of China said in a statement. The move comes less than two weeks after the central bank lifted interest rates for the third time in four months as Beijing struggles to control soaring prices, which it fears could lead to social unrest.
It also follows the release of data earlier this week which showed that consumer prices rose 4.9% last month, well above the government's targeted ceiling of 4% for the year and up from 4.6% in December.
The figures suggested Beijing's attempts to cool spending, which has sent price of everyday goods such as food and fuel soaring, would need to announce more measures.
Tuesday's data showed food costs continued to show strong growth last month, with grain prices up 15.1%, the government said. The grain supply situation has become an increasing source of official anxiety as ongoing drought across northern China has raised fears that the important winter wheat crop could be severely affected.
At the same time, prices of fresh fruit grew 34.8%. Inflation, particularly related to food, has a history of sparking unrest in China.
Inflation has become a hot issue for the government as the economy fizzes along after the global financial crisis and last year overtook Japan as the world's number two economy after the US. However, economists blame the huge stimulus measures introduced by Beijing during the downturn for sending prices soaring.
Home prices in most major Chinese cities rise
Home prices in most major Chinese cities rose in January, the government said today, in its first such announcement since changing the way it publishes the cost of property across the country.
The National Bureau of Statistics said earlier this week that it would stop publishing its much-watched average national property price index of the 70 biggest cities, which helped fuel public anxiety over inflation. The new index instead provides only data on individual cities, omitting the national average.
But the latest price rises under the new system suggest Beijing's battle to bring costs under control - such as interest rate hikes and raising the amount of money banks must hold in reserve - are not having the desired effect.
The bureau said today that prices of newly-built homes in 68 out of the 70 cities included in the survey increased in January from a year ago.
Haikou, capital city of the southern island province of Hainan, saw the biggest growth with a year-on-year rise of 21.6%, it said. Prices in Beijing and Shanghai rose 6.8% and 1.5%, respectively.
The National Bureau of Statistics said the new methodology would help consumers and policy-makers better understand price changes in their cities through more complete and locally focused data.
But scepticism has emerged that the move was made more to help tamp down concern over skyrocketing real estate prices and high consumer prices.
Even the earlier national property-price index had been criticised for understating the severity of the country's property inflation by diluting the large rises in big cities with tamer changes in smaller ones.
The last index under the old system showed property prices rose 6.4% year on year in December, despite policy measures such as higher down-payment requirements and bans on second and third-home purchases in some cities.
Independent estimates have generally shown greater increases in property prices than reflected under the earlier index.
