Thursday, 17 January 2008

PBoC raise the reserve requirement again

An entirely predictable move by the Chinese central bank, the highest level since 1984.

Chinese central bank to raise reserve requirement ratio by 50 basis points[China View]

BEIJING, Jan. 16 (Xinhua) -- China's central bank announced Wednesday it will raise the required reserve ratio for commercial banks by half a percentage point as of Jan. 25.

The ratio will be raised to 15 percent, the highest since 1984.This increase, the first this year, comes a month after the ratio was raised by a percentage point on Dec. 25.

The People's Bank of China (PBOC) said in a statement that the adjustment, part of its stringent monetary policy, is to draw back excess liquidity at banks and curb the overly fast credit growth.

Excess liquidity is a major challenge for the government as it could result in bubbles and economic overheating. China's benchmark Shanghai Composite Index almost doubled last year and the economy expanded 11.5 percent in the first three quarters.

The problem of excess liquidity becomes more prominent as the record trade surplus pumps more cash into the country.

China Financial Markets comments.[China Financial Markets]


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