China will raise the reserve requirement ratio by half a
percentage point to 13 percent for commercial banks from October
25, the People's Bank of China (PBOC) announced on Saturday.
This is the eighth such move this year and only one month after the
seventh hike of half a percentage point on September 25.
The move is aimed at "strengthening liquidity management in the
banking system and checking excessive credit growth", the central
bank said in a statement.
After the eighth rise, the reserve requirement ratio has reached a
ten-year high.
The move came after the central bank's announcement on Friday that
the country's foreign exchange reserve has exceeded 1.43 trillion
U.S. dollars by the end of September, up 45.1 percent from the same
period last year.
A total of 367.3 billion U.S. dollars were added to the country's
foreign exchange reserve in the first nine months, 120 billion U.S.
dollars more than the increment in the entire 2006.
The huge foreign exchange reserve is considered the main reason for
excess liquidity in China, as the central bank has to spend money
to purchase foreign exchange, aggravating the problem.
Excess liquidity could lead to price hikes and pour more fuel into
the sizzling economy.
By the end of September, the M2 -- a broad measure of money supply,
which indicates the monetary demand of the whole country, grew by
18.45 percent from a year ago to 39.31 trillion yuan.
China's commercial banks lent out 3.36 trillion yuan in the first
nine months, surpassing the full-year figure in 2006.
The key economic data, including the GDP and the inflation
indicator, which is to be released later this month, are estimated
to remain high. The consumer price index reached a decade-high of
6.5 percent in August, and the GDP rose by 11.5 percent in the
first half.
Besides a total of four percentage points hike of the reserve
requirement ratio, the central bank has reduced the tax on interest
income to 5 percent from 20 percent on August 15, and raised the
interest rates for five times this year.
(Xinhua News Agency October 14, 2007)
