China battles economic overheating.China is worried about inflation. Beginning on July 5, 2006, the People's Bank of China The People's Bank of China (PBC or PBOC) (Simplified Chinese: 中国人民银行; Traditional Chinese: (PBoC) is requiring all "financial institutions" to raise their capital reserves from 7.5 percent, the current level, to 8.0 percent. This has the effect of freezing bank funds (approximately us$18.8-billion) making these funds unavailable for lending. One of the reasons for the "overheating Overheating An economy that is growing very quickly, with the risk of high inflation. " of the Chinese economy is activity in the country's booming real estate market. At the same time the central bank insisted on additional bank reserves Bank reserves are banks' holdings of deposits in accounts with their central bank (for instance the European Central Bank or the Federal Reserve, in the later case called federal funds), plus currency that is physically held in bank vaults (vault cash). , China's Ministry of Land and Resources contacted "local land and resource authorities" imposing a one month deadline for the completion of surveys and statistical analyses on "property development and the supply of land in their areas." The effort is aimed at enhancing market transparency. The overall goal is to limit speculation in the real estate market. The monetary measures were undertaken following the PBoC's most recent quarterly survey of China's bankers. Of the bankers surveyed, 42.6 percent said that the "macroeconomy" was overheated o·ver·heat v. o·ver·heat·ed, o·ver·heat·ing, o·ver·heats v.tr. 1. To heat too much. 2. To cause to become excited, agitated, or overstimulated. v.intr. during the second quarter 2006. And 26.6 percent of respondents In the context of marketing research, a representative sample drawn from a larger population of people from whom information is collected and used to develop or confirm marketing strategy. said they expected the overheating would persist into the third quarter 2006. China's monetary tightening was reported in a posting on the Asia Times Online Asia Times Online is an Internet-only news and commentary publication that reports and examines geopolitical, political, economic and business issues, looking at these from an Asian perspective. website on June 20, 2006. Another sign of economic overheating came in announcement by the PBoC that the total amount of bank loans in May 2006 was nearly double the total amount of loans extended in May 2005. |
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