The move comes soon after the government last week raised the minimum down payment for second home purchases as authorities try to rein in the market with the economy growing at a blistering pace.

Under the new rules, announced at the weekend, banks can also refuse loans to people who cannot prove they have lived and paid taxes for at least one year in the city where they intend to buy, the State Council, or cabinet, said.

Last week the State Council raised the minimum down payment for second home purchases to 50 percent and set a minimum 30 percent deposit on first homes bigger than 90 square metres (970 square feet).

The latest moves highlight growing concern in China that the property market is overheating, after prices in major cities rose 11.7 percent year-on-year last month, the fastest since the survey was widened to 70 cities in July 2005.

The State Council also renewed a pledge last week to rein in runaway prices by increasing the supply of land for construction, accelerating the building of affordable housing and cracking down on speculative activity.

But Royal Bank of Canada senior analyst Brian Jackson said the measures would not be as effective as higher interest rates.

"I have very strong doubts that is going to be enough to get the results they want in terms of slowing down the property market and eventually they will have to use blunter instruments," Jackson told AFP.

China is trying various ways to prevent the growth of asset bubbles as the nation's economy surges -- it grew 11.9 percent in the further three months of the year -- and keep a lid on inflation.

Beijing has been clamping down on bank lending which has been blamed for fuelling speculative investment in the property sector.

Policymakers have raised bank reserve ratios twice this year -- effectively limiting the amount banks can lend -- and increased interest rates on benchmark three-month and one-year Treasury bills.

Analysts have forecast interest rate hikes as early as this month as well as a loosening of exchange rate policy, which has effectively pegged the yuan to the dollar since mid-2008.

earlier related report
Cooling steps expected as China economy surges
Beijing (AFP) April 15, 2010 - Pressure grew on Beijing to raise interest rates and loosen currency controls Thursday after official data showed the economy grew at a red-hot 11.9 percent in the first three months of the year.

The figure represents a second successive quarter of double-digit growth for the world's third-largest economy as it extends its recovery from a slowdown caused by the global slump.

But an easing in the consumer price index, the main gauge of inflation, could complicate the timing of a move on rates and the currency, analysts said.

"We have got off to a good start this year," Li Xiaochao, spokesman for the National Bureau of Statistics, told reporters.

"The momentum of national economic recovery has further expanded, which has laid a good foundation for reaching the targets set for the whole year."

The increase in economic growth was the largest since the onset of the global downturn and well above Beijing's target of eight percent for the year, which is seen as crucial in creating enough jobs to stave off social unrest.

But analysts warned that the data showed the economy was growing too fast and policymakers needed to raise rates and let the yuan appreciate to avert the risk of running out of control.

"The economy is a little bit too hot. I think policy needs to be tightened more aggressively to prevent overheating," Ben Simpfendorfer, an economist at Royal Bank of Scotland in Hong Kong, told AFP.

"Residential investment was a big driver of growth in the first quarter. Running an economy on residential investment is not sustainable."

While new loans issued by Chinese banks fell to 510.7 billion yuan (74.8 billion dollars) in March, property prices rose at the fastest pace in nearly five years, data showed this week.

The figures prompted the State Council, or cabinet, Wednesday to renew earlier promises to step up efforts to rein in prices by curbing speculative purchases and increasing land supply for construction.

Beijing has been trying to cool the property market and calm inflationary pressures by clamping down on lending fearing damaging bubbles in the sector, bad debts and the threat of economic overheating.

Policymakers have raised bank reserve ratios twice this year -- effectively limiting the amount banks can lend -- and increased interest rates on benchmark three-month and one-year Treasury bills.

Analysts have forecast interest rate hikes as early as this month as well a loosening of exchange rate policy, which has effectively pegged the yuan to the dollar since mid-2008.

Pressure is mounting on Beijing for a stronger currency, which critics say gives Chinese manufacturers an unfair advantage by making their exports cheaper.

US President Barack Obama told President Hu Jintao this week the yuan was "undervalued" and US lawmakers have been pushing for China to be labelled a "currency manipulator", but Beijing said it will not bow to foreign pressure.

However, the timing of such a move is less clear as the consumer price index rose just 2.4 percent in March, lower than February's 2.7 percent and below the government's inflation target of three percent for the year.

The lower inflation reading could persuade the central bank to delay an rate hike and a loosening of the currency policy, said Brian Jackson, a senior analyst at Royal Bank of Canada in Hong Kong.

Although "the case for policy tightening remains intact given the risks of China's economy overheating", he added.

Retail sales jumped 17.9 percent in the January-March period, while fixed asset investments, a measure of government spending on infrastructure, jumped 25.6 percent year on year.

Industrial output from the country's millions of factories and workshops rose 19.6 percent.

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