China’s bank reserve ratio increased

The People’s Bank of China have stated on their website that the commercial banks’ reserve ratio would rise 0.5 percentage points to 16.5 percent.

This move is in addition to the latest increase that was made less than a month ago.

The latest increase is in a bid to reduce the credit growth which in turn should help stabilize inflation.

The statistics bureau revealed this week that within the period, consumer prices rose 8.5 percent in April, compared to last year which was driven by food costs and energy bills.

Lending will be restrained as the increase will freeze about 208 billion yuan in the banking system, which will cool the world’s fastest-growing major economy by limiting the money supply.

Kevin Lai, a senior economist at Daiwa Institute of Research in Hong Kong, has said that the increase in the reserve requirement is not sufficient to curb inflation and that the central bank needs to take further drastic action.

Currently, inflation has quickened from 8.3 percent in March and has surpassed the 8.2 percent median estimate and is also the fastest rate amongst the world’s 10 biggest economies.

The yuan closed at 6.9882 versus the dollar, whilst the CSI 300 Index of stocks gained 0.7 percent.

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