China punishes state banks for over-lending

China's central bank just took 20 billion yuan or $3 billion out of state-owned banks by forcing them to purchase packages of central bank bills.

According to Business Insider, citing Shanghai Daily reports, the list of banks required to make the purchases includes the Commercial Bank of China, China Construction Bank, and The Agricultural Bank of China.

The central bank also told banks to include their margin deposits in required reserves at the central bank, which pulls an additional 800 to 900 million yuan or $125.23-140.89 million from the banking system.

The government made much of the fact that China's inflation cooled by 0.3% between July (6.5%) to August (6.2%), saying that it was a sign that monetary tightening measures are working.