The required reserve ratio for financial institutions engaged in deposit business will be raised by 0.5 percentage points as of May 15 to 11 percent, the People's Bank of China said Sunday.

 

This is the fourth time the central bank has raised the deposit reserve ratio this year and the seventh time since last year amid other efforts to rein in excessive liquidity and cool off booming economic growth.

 

The central bank raised the bank deposit reserve ratio by the same margin of 0.5 percentage points in June, August and November last year and January, February and on April 16 this year.

 

The further rise in reserve requirement ratio came after China reported surges in inflation, loans growth, investment, and gross domestic product in the first quarter of the year.

 

China's economy expanded 11.1 percent in the first quarter of the year, compared with 10.4 percent in the fourth quarter of last year.

 

The consumer price index of 3.3 percent in March, the highest in more than two years, was well beyond the comfortable target of three percent set by the Chinese government for the year.

 

The move also showed the central bank's determination to continue to tighten liquidity management, a major problem threatening China's economy.

 

China's foreign exchange reserve reached US$1.2 trillion by the end of March, up 37.36 percent from the same period last year, maintaining the largest in the world since the end of February 2006.

 

Li Xiaochao, spokesman of the National Bureau of Statistics, said recently that China's economy faces the risk of shifting from relatively fast growth to over-heating.

 

Li acknowledged that the Chinese government would take more small steps rather than drastic cooling measures to ensure a stable and fast economic growth.

 

(Xinhua News Agency April 29, 2007)