China does more to cool economy

Tightening steps are likely to include rises in required reserves and interest rates.

    Beijing will try to improve its balance of payments position by managing the yuan [GALLO/GETTY] 
    China took its latest aim at flush liquidity conditions on Friday by raising - for the fourth time since June - the amount of cash that lending banks must hold in reserve.

    The move followed two rises in benchmark interest rates last year.

    Investment boom

    Both steps are part of a long-running campaign to quell the source of a credit-fuelled investment boom which has raised fears of a boom-bust scenario.

    The authorities will also focus on trying to improve its international balance of payments position through management of the yuan, the think-tank said.

    Some of China's trading partners have long said the yuan is undervalued, thus giving Chinese exporters an unfair advantage in global markets and fuelling global imbalances.

    China has allowed the yuan to appreciate by a further 3.87 per cent since revaluing the currency by 2.1 per cent in July 2005 and abandoning a dollar peg in favour of a managed float.

    Some trading partners say the changes are meagre.

    Corruption

    Critics are also concerned about the level of corruption in China. The Beijing News reported on Tuesday that Chinese auditors found the government squandered 33.1bn yuan ($4.24bn) last year, despite repeated Communist party campaigns to rein in corruption and waste.

    The annual investigation was held by Li Jinhua, head of China's National Audit Office, who said he would also be keeping a close eye on Olympic construction sites and other major infrastructure projects.

    The audit office would "investigate and prosecute according to law if any bribery is discovered", the official Xinhua news agency quoted Li as saying.

    Li's report found government officials were responsible for economic losses of 5 billion yuan due to "illegal or irregular administration" last year.

    SOURCE: Agencies


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