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Strategies & Market Trends : China Warehouse- More Than Crockery
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To: RealMuLan who wrote (494)8/24/2003 3:14:13 PM
From: RealMuLan  Read Replies (1) of 6370
 
China hikes reserve requirement to avoid overheating
25 August 2003

BEIJING: China said yesterday it will hike reserve requirements for banks and other deposit-taking institutions by one percentage point in a bid to cool down sizzling sectors of the economy and ease lending risks.

The increase in the requirement - to seven per cent from the current six - could drain 150 billion yuan from commercial banks and takes effect on September 21, the central People's Bank of China said in a statement on its Web site, www. pbc.gov.cn .

The central bank had pondered the move for months as it mulled ways to soak up money supply amid fears of economic overheating, market sources said.

The central bank said the rise applied to all commercial banks and financial institutions except for rural and urban credit cooperatives.

It effectively takes capital out of the hands of China's lending institutions by locking up a larger proportion of deposits in the central bank.

But the central bank said the move would not trigger a decline in lending by financial institutions in the second half of 2003. "This is a mild policy," it said.

It also pledged to keep deposit and lending rates stable through the end of the year and reaffirmed top leaders' pledge to keep the yuan currency stable.

Analysts said the increased requirement could help cool down red hot sectors like autos, property and steel and ensure that the broader economy grow on a healthier track, by heading off potential bubbles and possible inflationary pressures.

stuff.co.nz
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