China has expanded the deposits that lenders must keep in reserve with the central bank as it struggles to curb inflation, the state Xinhua news agency reported Monday.

The People's Bank of China in its latest move to tighten credit has ordered commercial lenders to include margin deposits in the reserves they must set aside, Xinhua said.

The margin deposit is the collateral used for banks' off-balance sheet and securities transactions.

The move to further restrict bank lending indicates that containing inflation remains a government priority despite signs of a slowdown in the world's second-largest economy.

China's central bank has raised the reserve requirement ratio six times this year, restricting the amount of money banks can lend.

It has also hiked interest rates five times since October. Inflation hit a three-year high of 6.5 percent in July.

Ba Shusong, a researcher with the Development Research Centre of the State Council, or cabinet, told Xinhua the latest move was equivalent to increasing the traditional reserve requirement ratio by several basis points.

"Curbing price rises remains the top priority of macro-economic measures and the policy turning point that the market has been expecting is still yet to come," Ba said.

The bench-mark Shanghai Composite Index closed down 1.37 percent at 2,576.41 Monday, with banks leading declines.

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