The latest measure, which comes into force today, will see the deposit reserve ratio increased to 9 per cent for major State-owned banks and joint-stock banks, while it will rise to 9.5 per cent for smaller banks, including urban credit co-operatives.

"The latest figures may prompt the central bank to further tighten its monetary policy before the end of the year, with a further increase in the bank deposit reserve ratio being the most likely choice," Han said.

Despite the rebound in money supply growth, local currency lending maintained its stable growth and deposits fell slightly, the central bank said.

Outstanding local currency lending stood at 22.1 trillion yuan (US$2.75 trillion) at the end of October, a year-on-year increase of 15.2 per cent, which is almost the same as the previous month, the central bank said.

Banks issued 17 billion yuan (US$2.81 trillion) in new local currency loans last month, a drop of 9.4 billion yuan (US$1.19 billion) from a year earlier.

Financial institutions made a total of 2.78 trillion yuan (US$347 billion) in new loans in the first 10 months of the year, which surpassed the central bank's full-year target of 2.5 trillion yuan (US$312 billion).

Outstanding local currency deposits reached 32.93 trillion yuan (US$4.11 trillion) by the end of October, up 17 per cent year-on-year, the central bank said.

M1, which covers cash in circulation and current account deposits, jumped 16.3 per cent in October from a year earlier, which the central bank said "is mainly due to the rapid increase in deposits made by enterprises in the month."

Many economists have said that the massive foreign exchange reserve is to blame for the growth in money supply and credit.

"As long as the huge foreign exchange reserve continues to grow, it will complicate the central bank's efforts to curb money supply," Li Yongsen, an economist at Renmin University of China, said in an earlier interview with China Daily.

"The central bank has to release new money to mop up the excess US dollars in the marketplace and enforce a floating band for the renminbi, which is driving up money supply growth," Li said.

Fuelled by the growing foreign trade surplus and the inflow of foreign direct investment, China's foreign exchange reserve, already the world's largest, is believed to have exceeded the US$ 1 trillion mark.

China's monthly foreign trade surplus surged to a record US$ 23.8 billion in October, while foreign direct investment stood at US$42.59 billion in the first nine months of this year, although this was a year-on-year dip of 1.52 per cent.

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