This is the sort of drastic measure that monetary authorities take when they realize inflationary pressures are out of control and bank lending will further increase price pressure.
China's attempt to manage its currency value against the dollar is based on printing the yuan used to purchase dollars from exporters.
All that high-powered money will fuel inflationary lending, as Chinese citizens realize what's happening.
The clearest indicator that inflation is out of control in China is the increase in prices of real estate.
Either revaluation or recession is coming, the only question is when.
* * * * * J B K * * * * *
San Francisco
Beijing is worried that bank lending might spin out of control.
Loan activity soared 30% last year, to $1.4 trillion, notes Josef Karasin, head of emerging markets at research firm IdeaGlobal.
Beijing had been pleased at the hot pace of lending because the economy in China, like in most places, froze as the subprime mortgage crisis spread around the world.
Indeed, the government, which owns at least controlling shares in China's biggest banks, mandated that stepped-up lending.
But now the economy is roaring back, even as most nations tend to fledgling recoveries. Many analysts see 2010 GDP up about 10%.
Beijing finally tapped on the brakes a bit when officials saw that banks had lent 1.1 trillion yuan in the first few weeks of this year.
http://www.investors.com/NewsAndAnalysis/Article.aspx?id=518639
