tries China anew to stem loans - Print Version - International Herald Tribune China tries anew to stem loans By David Lague International Herald Tribune FRIDAY, JULY 21, 2006 BEIJING China's central bank tried Friday for the second time in five weeks to curb excessive lending in a bid to cool a surging economy. The People's Bank of China, the central bank, ordered commercial banks to increase the amount of funds they hold in reserve so there would be less credit available for investment in booming sectors including property and infrastructure. With the economy expanding at its fastest pace in a decade, banks as of Aug. 15 must raise the proportion of deposits they set aside to 8.5 percent from 8 percent. Earlier, banks were instructed to increase the reserve requirement to 8 percent from 7.5 percent by July 5. "Investment in fixed assets is increasing too fast and credit is growing too rapidly," the central bank said on its Web site. "The main purpose of this measure is to strengthen liquidity management and rein in too speedy growth in credit." The renewed effort to rein in lending had been widely expected after official figures released Tuesday showed that the Chinese economy grew 11.3 percent in the second quarter from a year earlier. An export boom combined with soaring investment in fixed assets including infrastructure and property propelled growth economic in the first half to 10.9 percent over the first half in 2005. The Asian Development Bank warned this week that the Chinese authorities had so far failed in their efforts to cool the economy. Along with increased reserve requirements for banks, the aid bank called on Beijing to increase interest rates and allow further appreciation of the yuan. Some analysts say the Chinese economy is in danger of overheating, which could lead to an outbreak of inflation and fresh round of bad loans accumulating in the banking system. But some analysts say concerns that the Chinese economy might overheat are overstated. They note that consumer prices increased only 1.3 percent in the first half. "I think China has a problem with unbalanced development," said Connie Leung chief economist with ERA Eco...