A senior researcher with the Chinese Academy of Social Sciences
(CASS) on Sunday said the latest reserve requirement ratio hike has
revealed that China's excess liquidity has risen beyond the
expectations of the central bank.
Peng Xingyun, of the CASS Institute of Finance and Banking, told
Xinhua that the People's Bank of China (PBOC) had raised the ratio
before releasing its financial figures for October, indicating the
bank's concern.
The PBOC announced on Saturday that it would raise the reserve
requirement ratio by half a percentage point for commercial banks.
The move, which goes into effect from Nov. 26, will push the ratio
to a ten-year high of 13.5 percent.
"The PBOC raised the reserve requirement ratio before it
releases October's money supply and other financial statistics next
week,?because it is concerned about the excessive liquidity
and credit increase," said Peng.
It is the ninth hike this year aimed at "strengthening liquidity
management in the banking system and checking excessive credit
growth", according to a statement posted on the PBOC's official
website.
Peng said the PBOC could raise the interest rate once again by
the end of the year.
"It is hard to tell whether the PBOC will raise the interest
rate in such a short span of time until the NBS makes public the
CPI and other?October indexes," said Peng.
PBOC figures showed that by the end of September, the M2, which
covers cash in circulation plus all deposits, grew by 18.5 percent
from a year ago to 39.3 trillion yuan (US$5.2 trillion).
China's commercial banks lent out 3.36 trillion yuan in the
first nine months, surpassing the full-year figure of 3.18 trillion
yuan in 2006.
Earlier this week, a report compiled by the Institute of Urban
Finance under the Industrial and Commercial Bank of China said the
long-term influx of liquidity would quicken due to the continuous
appreciation of the yuan and high rate of investment return
expectations in the country.
The influx of liquidity would also add pressure to the
overheated real estate and stock markets, warned the report.
The central bank also pointed out the country should optimize
the economic structure and continue to enact a variety of trade and
industrial macro-control polices?in addition
to?implementing a tighter monetary policy.
The country's consumer price index (CPI), a key inflation
indicator, rose by 4.1 percent in the first nine months over the
same period last year, according to the National Bureau of
Statistics (NBS).
The CPI eased slightly to 6.2 percent in September after surging
to an 11-year monthly high of 6.5 percent in August.
(Xinhua News Agency November 12, 2007)
