By Daily Crux Editor Justin Brill:

Today, China ordered banks to keep more deposits set aside as reserves for the second time this month. The country is trying to slow down its economy after recent data showed increasing price inflation and extremely high growth in bank loans.

Whenever a central bank raises reserve requirements or interest rates, it tightens the flow of credit... much like a water faucet. It tends to bring down asset prices as businesses and individuals find it more difficult to borrow money.

China is growing more concerned that all the easy credit is creating a bubble, but tightening credit and slowing lending will create major headwinds for Chinese stocks and real estate.

Chinese markets were closed when the announcement was made, but the news sent global stock markets tumbling.

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More on China:

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Why China wants gold to plunge to $800

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