Mumbai: China has raised the proportion of deposits that banks must hold in reserve by 0.5 percentage points, to mop up excess cash in the banking system.

The increase in the reserve ratio, that takes the ratio for big banks to a record 15 per cent, will take effect from January 25, the People's Bank of China (PBOC) said on its Web site.

This is the eleventh time China is raising cash reserve ratio for banks since the beginning of 2007.

While central banks in many western countries are trying to mop up liquidity, the PBOC, faced with a flood of inflows into the economy through the country's huge trade surplus, is trying to flush out excess liquidity.

China's trade surplus surged nearly 48 per cent in 2007 to $262.2 billion and annual consumer inflation hit an 11-year high of 6.9 per cent in November.

The PBOC last announced a reserve hike on December 8, when it was raised by a full percentage point.

The central bank also raised interest rates six times last year, the latest being on December 20. 

The central bank is expected to raise interest rates again before the Lunar New Year in early February if inflation remains.

Meanwhile, the inflation rate in China measured by the consumer price index, due to be released next week, is expected to ease to 6.5 per cent.