Friday, March 18, 2011

China Raises Reserve Requirements 50bps

The People's Bank of China increased the required reserve ratio by another 50bps, the third increase this year, placing the ratio at as much as 20% for large banks. The move, intended to restrict Chinese bank lending, takes effect on March 25. China reported inflation of 4.9% in February, compared to the government's target for 2011 of 4%. This increase in the reserve ratio will likely lock up as much as Rmb370bn in funds that banks would otherwise have been able to lend, as the Bank attempts to control stubbornly high inflation by reducing liquidity.


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