In February, as the lunar new year festivities were drawing to a close, China announced another interest rate rise, the second in two months and the third since the country began tightening monetary policy in October 2010. The latest 25-basis-point increase brought the one-year deposit rate to 3% and the one-year lending rate to 6.06%. Once again, longer-term deposit interest rates were raised by more than short-term rates in an effort to encourage people to put their savings into less volatile deposit accounts. In addition, the People's Bank of China (PBC, the central bank) raised reserve requirement ratios for banks by an another 50 basis points with effect from February 24th. This marked the second rise in reserve requirements in 2011, and took the minimum for the largest banks to a record 19.5%.

The adjustments came against a background of continued rapid growth in bank lending. Local-currency lending increased by Rmb1.04trn in January, less than the year-earlier figure of Rmb1.4trn, but the outstanding stock of renminbi lending was still up by 16.9% year on year. The extent of the tightening in credit availability is hard to gauge. Lending is traditionally high in January as some loan approvals are carried over into the new year when the previous year's credit quota is filled. In addition, this year banks are being asked to bring back on to their books loans that had previously been pushed off their balance sheets by means of sales to trust companies-a process that may push up total outstanding lending. A rise in interbank interest rates from an average 1.76% in November 2010 to 3.7% in January 2011 suggests that the impact on banks has been significant.

Lending to households for non-business purposes ("consumption", in the government's terminology) is accounting for a rising proportion of outstanding lending, reaching 15.7% at the end of 2010, up from 13.8% at end-2009. Short-term loans are also accounting for a higher proportion of these household consumption loans, at 12.7% at the end of last year, up from 11.5% at end-2009. This may represent a shift towards consumer financing and away from mortgage lending, which has traditionally dominated medium- and long-term household "consumption" lending.