The move is the latest of the government's tightening measures, which analysts say have already proved effective, as reflected in the first quarter figures.

M2, the broad measure of money supply which includes cash and all bank deposits, grew by 16.3 percent year-on-year in March, down 1.2 percentage points from February. Yuan loan growth was 14.8 percent, down from 15.7 percent in February.

The M2 and loan growth rate are the closest to the central bank's targets (16 percent for M2 and 14 percent for lending this year) in 13 months, said Ma Jun, a Hong Kong-based economist with Deutsche Bank.

"This is a great success for the authorities' tight monetary policy, relative to market expectations of a significant overrun of first quarter lending targets."

Yet, a slew of worrisome data such as rising material prices and labor costs continue to bother policymakers and most analysts agree that further tightening measures would be employed.

The producer price index, a leading indicator of consumer inflation, gained 8 percent in March from 6.6 percent in February, a three-year high.

Li said the NBS is keeping a close eye on when, and to what extent, the rising cost of producers will be passed onto consumers.

"The CPI in April may spike at around 8.9 percent, and the inflation outlook for May-June could be anywhere between 8.0 and 9.3 percent," Ma said.

"Given this outlook, the central bank will have to continue its tight monetary policy," he said.

(China Daily April 17, 2008)