China to raise reserve requirement ratio
Updated: 2008-06-07 19:49
BEIJING -- China's central bank on Saturday ordered lenders to set aside more money as reserve, the fifth such move for this year. It was the latest effort to enhance liquidity management in the banking sector.
The reserve-requirement ratio would be raised by 0.5 percentage point on June 15, and another 0.5 percentage point on June 25, the People's Bank of China (PBOC) said on its website.
This will bring the ratio to a record high of 17.5 percent.
The PBOC also said that corporate financial institutions in the worst quake-hit areas would postpone carrying out the regulation. But it didn't say how long the delayed period would be.
"The rise, a further materialization of the tight monetary policy, is aimed at strengthening liquidity management in the banking system," the statement said.
The PBOC had raised the ratio four times previously this year. The latest was on May 12 when it lifted the ratio to a new high of 16.5 percent.
Yin Jianfeng, director of the Institute of Finance and Banking with the Chinese Academy of Social Sciences, said the move would help the country reduce inflationary pressure and to control excessive investment.
"But the move will not be as effective as the government expected because inflation nationwide mainly resulted from surging production material and food prices," he said. "A simple monetary policy will not help."
The consumer price index (CPI), the main inflation gauge, was up 8.5 percent in April from a year earlier. This was nearly equal to February's 8.7-percent rise, the most since May 1996.
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