Jan. 16 (Bloomberg) -- China imposed price curbs on meat, eggs and cooking oil and ordered banks to set aside larger reserves to try to reduce inflation from an 11-year high.

The top planning agency said it will vet price increases after soybean oil climbed 58 percent and lamb rose 51 percent this month from a year earlier. The central bank ordered lenders to set aside 15 percent of deposits, the highest ratio in at least 20 years. The announcements were on their Web sites.

The government is imposing price freezes and curbs on money-supply growth after inflation soared to 6.9 percent in November. Deaths and injuries in food stampedes underscore the risk of social unrest, reviving memories of the Tiananmen Square protests of 1989, partly triggered by rising prices.

``Inflation is always politically a very sensitive issue and the government wants to be perceived as on the people's side,'' said Mark Williams, an economist at Capital Economics Ltd. in London.

The reserve ratio jumps 0.5 percentage point, effective Jan. 25, removing about 190 billion yuan ($26.3 billion) from the financial system. It's the 11th increase since January last year.

China may keep raising the requirement as export sales threaten to drive inflation higher by flooding the economy with cash. That's even after the trade surplus narrowed to $22.7 billion in December from $26.3 billion in November and money- supply growth slowed to 16.7 percent.

Too Much Money

``There's excessive liquidity in the financial system,'' said Wang Tao, an economist at Bank of America Corp. in Beijing. ``The government is still highly concerned about rising inflationary pressure.''

Frank Gong, Hong Kong-based chief China economist at JPMorgan Chase & Co., said administrative measures to curb prices make ``near-term'' increases in interest rates less likely. The ``most effective tool'' for tackling excess money and inflation would be a faster appreciation of China's currency, the yuan, he said.

The currency's gained more than 14 percent versus the dollar since the end of a fixed exchange rate in July 2005. It traded today at the strongest since the peg was scrapped, advancing 0.13 percent to 7.2324.

On Dec. 20, China raised interest rates for the sixth time in 2007. The key one-year lending rate is 7.47 percent.

Poverty, Food Stampedes

The State Council, China's cabinet, and the Communist Party's ruling Politburo say inflation is one of the key risks facing the world's fourth-largest economy this year. A central bank survey showed last month that Chinese households' concern over rising prices was at the highest level since 1999.

``Significant price increases of some key commodities over the past few months have affected people's lives, especially low-income households,'' the National Development and Reform Commission said today, announcing the price curbs.

The World Bank estimates 300 million Chinese people live in poverty. Three people died in last year's worst food stampede, at a cooking oil sale at a Carrefour SA supermarket in Chongqing.

China last week announced a freeze on energy prices and the State Council on Jan. 13 said it more than tripled the maximum fine for companies that fix prices.

The NDRC today said makers and sellers of grain, cooking oil, meat products, milk, eggs and liquefied petroleum gas must seek government approval for price increases.

`Social Tension'

``It's the first time the government has done this since it started moving towards a more market-oriented economy in the early 1990s,'' said Zhu Baoliang, chief economist at the State Information Center in Beijing, an affiliate of the commission. ``Price collaboration and manipulation could create greater social tension.''

Prices of pork surged 43 percent and beef climbed 46 percent in the first 10 days of January from a year earlier, the NDRC said, citing results for 36 major cities.

The NDRC said 12 companies, including makers of cooking oil, instant noodles and milk, must seek approval 10 days ahead of price increases. They include Uni-President Enterprises, China Mengniu Dairy Co., Tsin Hsin International Group, Cofco Ltd., Bright Dairy & Food Co. and Wilmar International Ltd.

Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong, has predicted that the reserve ratio will rise to 18 percent in 2008. Frank Gong has forecast a jump to 16 percent. The previous increase in the reserve ratio -- a 1 percentage point jump that took effect on Dec. 25 -- was the biggest in four years.

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.netNipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net;

Last Updated: January 16, 2008 07:36 EST