China has raised the amount of money that banks must hold in reserve, and therefore not lend, for the fourth time in two months. The reserve requirement ratio was raised by 50 basis points to a record high of 19.5 percent. The move will drain about USD53 billion from the Chinese economy, but many believe the government will raise rates further to combat inflation. Analysts say interest rates could be raised twice in the first quarter of 2011, while reserve requirement ratios could also be hiked twice in the quarter. China’s inflation grew by 5.1 percent in December, to reach a 28-month high. While Chinese government officials are attempting to slow runaway loan growth in the country, unnamed sources told Reuters that banks have doled out RMB500 billion (USD75.9 billion) in new loans, about as much as was lent out in the whole month of December.

The Korea Composite Stock Price Index (KOSPI) gained 0.9 percent on Friday to 2108.17 on market hopes for a sustained global economic recovery. The benchmark index rose by a total of 1.1 percent this week, the seventh straight week of gains. Automakers led the way, with Hyundai Motor rising 4.4 percent to KRW200,500 and Kia Motors gaining1.2 percent to KRW58,900. Financial stocks were buoyed by the expectation for further interest rate hikes, which would benefit the bottom line for financials. The Bank of Korea on Thursday surprised market watchers by raising the benchmark interest rate by 25 basis points to 2.75 percent in order to combat rising inflation. The central bank also instituted a series of measures aimed at controlling prices for products used by low- and middle-income households.