13 Jan 2010 08:01

China to lift bank reserve ratio by 50 basis points

Shanghai. January 13. INTERFAX-CHINA - China's central bank, the People's Bank of China (PBOC), will increase the bank reserve ratio by 50 basis points, the bank announced on Jan. 12.

According to the announcement, the bank reserve ratio will be raised from the current 15.5 percent to 16 percent, effective from Jan. 18. This marks the first time the PBOC has lifted the reserve ratio since June 2008.

To cushion the Chinese economy from the recent global economic downturn, China substantially loosened control on bank lending in 2009. Over the first 11 months of 2009, new loans in China were valued at RMB 9.21 trillion ($1.35 trillion), up 82 percent on an annual basis.

In the first week of 2010 alone, RMB 600 billion ($87.85 billion) in new loans were granted in China.

The new reserve ratio hike is aimed at preventing bubbles in China's property and stock markets pushed up by bank lending overgrowth, Chinese analysts say.