Banking News
- Central bank raises reserve ratio again
Date: 15-Oct-2007 Sources: (Shenzhen Daily)
THE central bank Saturday raised the proportion of deposits that banks must hold in reserve for the eighth time this year, extending a campaign to prevent the world's fourth-largest economy from overheating.
The half-point increase in the reserve requirement ratio, which will take effect Oct. 25, brings the ratio for big banks to 13 percent, matching the record rate that was in effect from September 1988 to March 1998.
The People's Bank of China (PBOC) said that the move, which comes a day after data showed an unexpectedly strong expansion in money supply and lending, is meant to strengthen management over liquidity in the banking system and prevent money supply and credit from growing too quickly.
Annual growth in the broad M2 measure of money supply accelerated to 18.5 percent in September from 18.1 percent in August. The stock of yuan-denominated loans rose 17.1 percent, up from August's 17.0 percent.
Seeking to keep such growth in check, the central bank has now increased banks' required reserves eight times and interest rates five times so far this year.
'It seems that the Fed's recent rate cut restricts China's space for raising interest rates,'said Lin Zhaohui, an analyst with Guotai Junan Securities in Shanghai, referring to the U.S. Federal Reserve's 50 basis point cut in September.
'Over the next few months, we will probably see the People's Bank of China relying more on measures to control the amount of liquidity rather than the price of money.'
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