China raises banks’ reserve requirements

BEIJING - China on Thursday raised banks’ reserve requirements for the sixth time since last June, extending a campaign to mop up excess cash inundating the world’s fourth-largest economy.

By (Reuters)

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Published: Thu 5 Apr 2007, 6:24 PM

Last updated: Sat 4 Apr 2015, 9:03 PM

The People’s Bank of China said on its Web site ( that the 0.5 percentage point increase in the reserve requirement ratio would take effect on April 16.

“The central bank will continue to implement stable monetary policy, use different tools to enhance liquidity management in the banking system, keep liquidity at an appropriate level and avoid excessive growth in the money supply and credit,” the central bank said in a statement.

It was the third increase this year in the proportion of deposits that banks must tie up in reserve at the central bank instead of lending out.

“This was basically within my expectations as the pressure of excess liquidity is quite intense. We have been expecting the government to impose a series of tightening measures,” said Cheng Manjiang, an economist with Bank of China International in Beijing.

The ratio for big banks rises to 10.5 percent, while that for smaller lenders rises to 11.0 percent.

The central bank has also raised interest rates three times in the past year. The most recent of those went into effect on March 18.

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