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China's foreign exchange reserves, the world's largest, grew 23 percent in 2009 and bank lending for the year blew past government targets, keeping pressure on policymakers to take more action to cool the economy.
Chinese banks doled out 9.6 trillion yuan in new loans last year, data showed on Friday, far exceeding the government's minimum target of 5 trillion yuan and amounting to nearly 30 percent of 2008 gross domestic product.
Full-year gross domestic product data as well as consumer inflation figures are due on Thursday and will likely underscore how hot China's economy is running, underlining the central bank's decision on Tuesday to lift bank reserve requirements for the first time since June 2008. "Hikes in bank reserve ratios will continue to be the central bank's main tool this quarter.
Inflationary expectations will rise sharply in coming months, putting bond yields under heavy pressure to rise," said Yang Yongguang, senior bond market analyst with Guohai Securities in Shenzhen. Indeed, government bond yields edged higher, with the one-year yield rising to 1.5691 from 1.5555 on Thursday. China's stash of foreign currency reserves rose $126.5 billion in the fourth quarter to $2.4 trillion, the central bank said, in line with market expectations.
December's gain of $10.3 billion was the smallest since February, when reserves actually shrank, though economists said valuation effects could have been the cause. A broad measure of China's money supply slowed to annual growth of 27.7 percent in December compared with 29.7 percent in November, but analysts still expected policymakers to try to curb growth in the stock of money in the first half of 2010.

Copyright Reuters, 2010

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