China Raises Reserve Requirements to Fight Inflation

China increased reserve requirements at banks in a bid to control inflation and head off a potential credit bubble.

State-owned banks must set aside an extra 0.5% of deposits as reserves, starting Nov. 29. That means some lenders could be setting aside as much as 19% of deposits, The Associated Press said.

It's the second time this month that China has ordered banks to hold bank more reserves. Inflation hit 4.4% in October, the highest in more than two years. The official target for inflation is 3%

Chinese officials are worried about the impact of high inflation on poor families that spend as much as half their incomes on food.

Growth in the world's second-largest economy hit an annual rate of 11.9% in the first quarter of this year, before falling to 9.6% in the third quarter.
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