China still has room to raise the funds its banks must hold in
reserve this year, despite the requirement ratio being at a 24-year
high, experts said.
China's central bank announced late on Wednesday it would raise
the bank reserve requirement ratio by half a percentage point to 15
percent on Jan. 25.
The first raise this year followed 10 such moves last year as
China sought to ease excess liquidity that is pushing the economy
to the verge of overheating.
Li Huiyong, a Shenyin and Wanguo Securities senior analyst, said
"the requirement ratio may rise to 19.5 percent within the year
because liquidity pressure will remain high, especially in spring
when there is usually an investment boom."
"The central bank will try harder to absorb liquidity and
prevent credit growth from rebounding as huge amounts of central
bank bills reach maturity," he said.
A record 1.27 trillion yuan (173.97 billion U.S. dollars) of
central bank bills, which had been issued to commercial banks to
curb lending, will mature in the first quarter, according to
government figures.
Qu Hongbin, HSBC China chief economist, said the central bank
would have to lift the requirement ratio to 19 percent this year to
offset the liquidity generated by the mounting foreign exchange
reserve.
The country's foreign exchange reserve reached 1.53 trillion
U.S. dollars at the end of 2007, up 43.3 percent from a year
earlier. The record-high reserve may add to overflowing liquidity
as it pumps more cash into circulation.
However, frequent increases in the bank reserve requirement had
exerted great pressure on small- and medium-sized banks and the
space for further such increases was shrinking, said Ha Jiming,
China International Capital Corp. Ltd chief economist.
"The requirement ratio is likely to reach 16 or 17 percent this
year. But China will rely more on central bank bills to check the
excessive growth of lending," he said.
(Xinhua News Agency January 18, 2008)
