The People’s Bank of China moved to drain cash from the financial system and curb bank lending as it increased commercial banks’ required reserve ratio on Monday, AP reported. As of May 20, the proportion of banks’ total deposits that must be held in reserve will go up by half a percentage point to 16.5%. The announcement came within hours of the National Bureau of Statistics revealing that the inflation rate grew by 8.5% in April. The increase in consumer prices was up on the 8.3% rise posted in March but short of February’s 12-year high of 8.7%. Food prices rose 22.1% in April despite government efforts to increase the supply of items such as pork and grain as well as the imposition of price controls on basic goods. Non-food inflation was 1.8% in April, equaling the one-year high posted in March, as producers passed on rising costs of raw materials and energy to consumers.
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