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China's Central Bank Announces Hike in Bank Reserve Ratio


China's central bank announced a hike in its bank reserve ratio, and the world's biggest passenger plane took off this week from Singapore for its inaugural commercial flight to London. Naomi Martig in Hong Kong has more on these and other business stories from the region.

In its latest measure to curb inflation and control excessive credit growth, China's central bank raised the amount that lenders must hold in reserve by 50 basis points. It marks the bank's 15th hike since mid-2006. The increase comes into effect on March 25, and takes the ratio for big banks to a record 15.5 percent.

Stephen Green, senior China economist at Standard Chartered Bank in Shanghai, says raising the bank reserve ratio for lenders is a simple way for China to sustain reasonable levels of loan growth.

"Lot's of deposits are growing very strongly, and if the central bank didn't do this then the banks would want to lend out those deposits, but the central bank wants to control loan growth, so this is one of the ways they do that," said Green.

Analysts say volatility on Wall Street this week may offset China's latest policy tightening move, as bank lending could also be shaky due to tighter liquidity conditions. But they say any impact should be limited.

The United States is facing a lingering subprime mortgage crisis, while the Federal Reserve is taking steps to ward off a threat of a U.S. recession. Green says compared to the United States, China's financial concerns are very different from Washington's.

"China is coping with overheating, with inflation and massive inflows of liquidity," he said. "So at the moment they are in very different places."

Elsewhere in Asia, Japan's Mitsubishi Electric Corporation announced a $470 million investment to boost solar cells as global demand rises on high oil costs. On Wednesday, Mitsubishi said the investment is aimed at more than tripling its megawatt capacity at two domestic factories by 2013.

Investments in renewable energy resources, have gained tremendous momentum in the last year because of high oil costs and increased concerns about excessive carbon emissions.

And in Singapore, the world's largest passenger plane took off on Tuesday from the city-state for its inaugural commercial flight to Europe. The A380 commercial flight carried 449 passengers and landed safely at London's Heathrow Airport.

Singapore Airlines had configured the double-decker plane, which can carry up to 853 passengers, including 12 exclusive suites that come with full-length beds and flat screen televisions.

Singapore Airlines acquired its first A380 in October 2007, becoming the first airline to operate the world's biggest passenger jet with the launch of a successful commercial service from Singapore to Sydney.

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