Comm6article - Chinas Central Bank Hits Brake on Hot...

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China’s Central Bank Hits Brake on Hot Economy http://www.nytimes.com/2010/02/13/business/ global/13yuan.html By KEITH BRADSHER Published: February 12, 2010 (The New York Times) China’s central bank moved late Friday to reduce lending to companies and individuals by requiring large commercial banks to increase the amount of cash they park with the central bank. The move, which came earlier than most economists had expected, was meant to slow China’s breakneck economy and inflation. It was the second time in a month that the central bank had directed the country’s banks to increase reserves. In spite of the earlier edict, which took effect on Jan. 18, banks actually lent more money in January than in the previous three months combined, illustrating just how hard it is for Beijing to modulate its rapidly expanding economy. Chinese economists now predict the economy will grow about 10 percent this year, while Western economists put the figure closer to 12 percent. The growth reflects a revival of exports, strong consumer spending and heavy government investment in infrastructure projects like high- speed rail lines. But authorities in Beijing are walking a delicate and difficult line. They consider controlling inflation as key to domestic peace because in the past the erosion of the spending power of workers has led to unrest. At the same time, if China brakes too hard, it risks slowing global growth overall and throwing other countries, including the United States, back into recession . For the first time in history,
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