Economy

China raises bank reserve ratio by 50 points

(Xinhua)
Updated: 2011-01-14 20:35
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BEIJING - The People's Bank of China (PBOC), or the central bank, said Friday that it would lift the banks' reserve requirement ratio by 50 basis points as of January 20.

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After the hike, Chinese major banks will have to set aside 19 percent of their reserves and small and medium banks will have to keep 15.5 percent of their deposits as reserve, a record high for the country's deposit-taking institutions.

According to the PBOC's latest figures, the reserve ratio hike will tighten another 350 billion yuan ($53.1 billion) of banks liquidity as the outstanding yuan-denominated deposits in China stood at 71.82 trillion yuan ($10.9 trillion) by the end of 2010.

It was the PBOC's first move in 2011 to tighten excessive liquidity in the market amid mounting inflationary pressure.

The PBOC had raised the banks' reserve ratio for sixth times last year to rein in accelerating inflation, as China's consumer price index (CPI), a main gauge of inflation, hit 5.1 percent in November 2010, the highest in 28 months.