China Is Ready For Increasing The Bank Reserve
It is reported that China on Friday annunciated they would growth bank reserve demand
ratio for the 7th time in the past year, and amid compounded business concern about ostentation.The People's Bank of China, said on its website that it would lift the bank appropriate demand ratio by 50 basis points as of Jan. 20.As we can see that after the hike, China' s major banks will have to engaged 19% of their reserves, and the other small and average banks will have to assert 15.5% of their bank deposit as reserve, a record high for the country's financial asylums.
As we can see from the data that allotting to the PBOC's latest anatomies, the reserve ratio hike will constrain another 53.1 billion U.S. dollars of bank fluidity as the outstanding RMB-denominated bank deposit in China stood at 10.9 trillion U.S. dollars as of the end of 2010.
It is said that was the PBOC's first move in 2011 to tighten extravagant fluidity in the marketplace amid mounting inflationary pressure.The PBOC had raised the banks' reserve ratio six times last year to rein in quickening ostentation as China's CPI, a main gauge of ostentation, reached 5.1% in November 2010, the highest in 28 months.
The director of the Financial Science Institution, Jia Kang said that this latest hike was in line with the central bank's policy of checking market liquidity in recent months while showing its conclusion to fight ostentation.
It is reported on Tuesday that according to figures discharged by the central bank. Chinese banks lent 1.17 trillion U.S. dollars last year. Although the data was 0.25 trillion U.S. dollars to a lesser extent than the 2009 level of 1.45 trillion U.S. dollars, it still was bigger than the government-set full-year ceiling of 1.13 trillion U.S. dollars.
Media reports said nearly 75.47 billion U.S. dollars in loans were brought out in the first week of 2011, as banks habitually rushed to lend more at the first of the year to secure profits, while turning a deaf ear to the regulator's call for credit control.
The China Construction Bank researcher, Zhao Qingming, said break away credit growth would exasperate inflation while it already is high. Higher reserve rates would balance that.Further, the nation's foreign exchange reserves topped 2.85 trillion U.S. dollars as of the end of 2010, following robust export growth and high-risk money inflow betting on a harder RMB.
It is reported that would also push up ostentation as the central bank had to issue the same amount of RMB to offset influxes, which blew up domesticated fluidity. To mop up liquidity, the central bank issued currency worth 56.75 billion U.S. dollars in the past 9 weeks, but that hardly checked the alluvion.
However, the deputy secretary general of the China Development Research Foundation Tang Min said a reserve essential rate rise could not solve all the problems. Negative interest rates amid high ostentation could eat up residents' bank deposit.
by: Amanda Xia