China raises reserves
(16 February 2010 – China) In an effort to contain new lending China’s central bank made the move last week to increase the reserve levels required to be held by banks for the second time this year.
Last week large banks were ordered to raise their reserves by half a percentage point, which set the reserve level at 16.5 percent of their deposits.
Smaller institutions had their level increased to 14.5 percent and lenders to the rural sector were exempt from the hike.
Markets around the world were shocked by the move, sparking fears that the country would be more aggressive than initially thought in reigning in inflation, potentially denting global growth.
Xie Xuecheng, economist, Southwest Securities, Beijing, said that the country’s central bank is sending a clear message to banks that it wants more reasonable bank lending and is paying close attention to inflation.
In 2009, massive lending triggered fears that excess liquidity was fuelling inflation and encouraging spending sprees by spectators, resulting in property and stock market turbulence.
New lending last month increased to 1.39 trillion yuan (A$22.8 billion) and property prices soared at the fastest rate since April 2008, according to figures published by the National Bureau of Statistics.
Smaller institutions had their level increased to 14.5 percent and lenders to the rural sector were exempt from the hike.
Markets around the world were shocked by the move, sparking fears that the country would be more aggressive than initially thought in reigning in inflation, potentially denting global growth.
Xie Xuecheng, economist, Southwest Securities, Beijing, said that the country’s central bank is sending a clear message to banks that it wants more reasonable bank lending and is paying close attention to inflation.
In 2009, massive lending triggered fears that excess liquidity was fuelling inflation and encouraging spending sprees by spectators, resulting in property and stock market turbulence.
New lending last month increased to 1.39 trillion yuan (A$22.8 billion) and property prices soared at the fastest rate since April 2008, according to figures published by the National Bureau of Statistics.
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