China's central bank has ordered banks to set aside larger reserves for the fourth time this year after the country's inflation accelerated close to its highest level since 1996.

The People's Bank of China (PBC) said it will raise the reserve requirement to a record 16.5 per cent of deposits on May 20, up from the current requirement of 16 per cent.

The higher reserve level may restrain lending by banks, helping to cool the world's fastest-growing major economy.

The central bank said in a statement: "In order to strengthen liquidity management in the banking system and guide the rational growth of money and credit, the PBC has decided to raise the RMB [renminbi] reserve requirement ratio for depository financial institutions by 0.5 percentage points."

China's inflation rate rose to 8.5 per cent in April as food prices continued to soar, the National Bureau of Statistics revealed today.

This marks a reacceleration of China's inflation after the consumer price index weakened to 8.3 per cent growth in March from 8.7 per cent in February.

Overall food prices increased by 22.1 per cent in April from a year earlier, while the price of pork, the most popular meat for most Chinese, was up 68.3 per cent over the same period.

Wen Jiabao, the Chinese Premier, said in March that the government wanted to keep inflation at 4.8 per cent this year.

The bureau said in a statement today: "Growth in consumer prices remains high. At the moment, we must pay close attention to future price trends and prioritise the control of price increases and inflation even higher."

"It is linked to the fact that the international prices of primary products, and especially grain prices, continue to rise, impacting domestic food prices," it said.

Goldman Sachs said the latest figures were higher than market expectations, warning that it was "still far too early to claim success in the battle against inflation".

The investment bank said in a research note: "As underlying inflationary pressures remain undiminished, it is vital for the government to keep its tightening policy stance to anchor inflationary expectations."

Wang Qishan, the Chinese Vice Premier, warned last Friday that global inflation posed a threat to the country's economic growth, saying high prices abroad constituted a major pressure for the economy.

"China's economy continues to grow fast... although the economic pace is facing contradictions and problems," Wang said in a speech at a financial forum in Shanghai.

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