China's central bank on Tuesday said it was raising banks' reserve requirements by 0.5 percentage points, effective January 18, in the clearest sign yet that it has begun to tighten monetary policy.

It was the first time that the People's Bank of China adjusted the amount of deposits that commercial banks must keep on reserve since it lowered the ratio in December 2008 as part of its loosening cycle at the time.

(Reporting by Zhou Xin and Simon Rabinovitch; Editing by Tom Miles)