China raises bank reserve ratio for some banks

China's central bank has ordered six lenders to temporarily increase the amount of money they must keep in reserve to rein in lending and combat rising inflation, state media said Tuesday.

The People's Bank of China on Monday hiked the reserve requirement ratio for the six lenders by 50 basis points to 17.5 percent for two months, the China Securities Journal said, citing unnamed sources.

The six banks include the four major state-owned lenders -- Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China, the report said.

The other two lenders are China Merchants Bank and China Minsheng Banking Corp, it said.

It is the fourth time this year that China has raised banks' reserve requirement ratio and comes after new lending in September "significantly exceeded regulators' expectation", an unnamed source was quoted as saying.

The move is also in response to rising inflation, the source said, which rose at the fastest pace in nearly two years in August, as severe floods and unusually hot weather destroyed crops, driving up food prices.

The four major lenders extended more than 200 billion yuan (30 billion dollars) in new loans last month while the nation's total lending in September may have reached 500 billion yuan.

Beijing has set a full-year loan target of 7.5 trillion yuan for 2010 after a record 9.6 trillion yuan was lent last year following calls by the government to help support the economy during the global downturn.

But China has been trying to rein in the surge in new lending as fears now grow that rising inflation and a possible new crop of bad loans could derail growth.