Commodities prices fell yesterday after China's central bank pledged to take further steps to cool its economy by curbing access to domestic finance.
For the first time in two years the People's Bank of China (PBoC) last week increased by 0.5 percentage points, to 8 per cent, the reserve thatbanks are required to maintain.
In a statement yesterday the bank said that it would "strengthen the management of liquidity in the banking system and restrain excessive growth in money supply and credit".
The credit tightening and the tough language come just two months after the bank increased its benchmark one-year lending rate by 0.27 points to 5.85 per cent, the first rise since October 2004.
David Shairp, global strategist at JP Morgan Asset Management, said: "[There are] fears excess lending at a local level will set the backdrop for economic boom to turn to bust."Fears of a slowdown in Chinese growth hit commodity markets.
Oil fell almost a dollar to $69 a barrel, helped by positive comments by Iran on its atomic work.
Copper fell almost 4 per cent, while gold lost almost 2 per cent.
But analysts believe the major issue remains China's commitment to let its currency's exchange rate rise, especially against the dollar.
Despite taking tentative steps towards liberalisation the PBoC has continued to intervene to limit the appreciation to 1.4 per cent in the past 11 months.
David Cohen, an economist at consultants Action Economics, said Chinese officials had talked about the need to "rein in" growth.
He said: "Beijing might be warming to the argument that allowing a more rapid rise in the yuan would augment the recent tightening measures by the PBoC."
