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China raises bank ratio amid new inflation concern (Roundup)

May 12, 2008, 9:45 GMT

Beijing - China on Monday raised its bank reserve ratio as soaring food prices kept monthly consumer price inflation at 8.5 per cent, the highest rate recorded in April for 11 years. The National Bureau of Statistics said April food prices jumped 22.1 per cent year-on-year, with pork rising 68.3 per cent and cooking oil up 46.6 per cent. The resulting rise in the consumer price index was higher than the March figure of 8.3 per cent but marginally below the 11-year high of 8.7 per cent recorded in February. The rise suggests that government efforts to rein in investment and inflation are still not enough, prompting the central bank to announce a rise of 0.5 percentage points in the reserve requirement ratio for commercial banks. 'The rise is aimed at strengthening liquidity management in the banking system and steering bank credits to grow reasonably,' the People's Bank of China (PBOC) said in a statement. Monday's rise was the fourth by the bank this year and lifts China's reserve requirement ratio to 16.5 per cent from May 20. It follows 10 rises in the ratio and six hikes in interest rates last year. Price hikes were also seen by manufacturers in April as the producer price index rose 8.1 per cent, primarily because of the higher costs of energy and raw materials. Experts estimated that those higher prices being absorbed by producers would show up in the cost for consumers in about six months. They also said they doubted that China's government could hit the target it set in March of less than 4.8-per-cent inflation for the year. China's economy grew at an annual rate of 10.6 per cent in the first quarter, down from 11.9-per-cent growth recorded in all of 2007, as exports fell and snow closed plants.

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