China to raise deposit reserve ratio to 10.5% on April 16th

Source: CCTV.com | 04-06-2007 15:30

A clerk counts renminbi banknotes at a China Construction Bank branch in Haian, Jiangsu Province in this file photo. China told banks Thursday to increase their reserves for the third time this year, cutting the amount of money available for lending in a new effort to cool an investment boom. [newsphoto]

China plans to keep up its pace of monetary tightening by raising the required deposit reserve ratio for the third time this year. The central bank announced Thursday that it will increase the ratio by a half percentage point to 10.5 percent, effective on April the 16th.

This is the sixth time for the People's Bank of China to raise the deposit reserve ratio since last year. The central bank raised the bank deposit reserve ratio by the same margin of 0.5 percentage points in June, August and November last year, as well as in January and February this year.

The latest increase takes the reserve requirement to 10.5 percent for big banks and 11 percent for smaller lenders. It means that banks have to tie up an extra 160 billion yuan, which may otherwise have been lent out. China is striving to implement stable monetary policy and strengthen liquidity management in the banking system.

To curb the excessive liquidity, the central bank has raised the one-year benchmark interest rates by 0.27 percentage points as of March the 18th. It said on Thursday that it will continue prudent monetary policies, tighten control over bank liquidity to maintain a proper liquidity level and to prevent excessive growth in monetary credit.

Editor:Du Xiaodan