The People’s Bank of China raised reserve requirements for lenders 10 days after boosting interest rates as Chinese Premier Wen Jiabao (溫家寶) tries to tackle accelerating inflation and the risk of asset bubbles in the fastest-growing major economy.
Reserve ratios will increase half a percentage point starting on Thursday, the central bank said on its Web site yesterday in a one-sentence statement.
The move will lock up about 356 billion yuan (US$54 billion), Nomura Holdings Inc said.
People’s Bank of China Governor Zhou Xiaochuan (周小川) said policy makers may also use means “including rates and currency” to tackle inflation, in an interview in Paris after the reserve-ratio announcement.
“China has a profound liquidity and inflation problem that is, even with this latest tightening, getting further ahead of policy makers,” said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong.
“If the Chinese start to take out the liquidity that’s been so important, it’s got the potential to be a disturbance for the world’s stock markets,” said Philippe Gijsels, the Brussels-based head of research at BNP Paribas Fortis Global Markets.
In Paris, Zhou said raising reserve requirements is just one way to fight inflation.
“We can’t really say that it’s the only method that we’ll use to battle inflation, it’s about using all means including rates and currency,” said Zhou, who is attending a gathering of G20 finance ministers and central bankers.
In China, inflation accelerated to a 4.9 percent annually last month, exceeding the government’s target for a fourth month. Banks extended 1.04 trillion yuan of new loans last month, more than double the level in December.
Reserve ratios stood at 19 percent for the biggest banks before the move, excluding any extra requirements for individual lenders not publicly announced. The central bank has said that it may use bank-specific requirements this year to control credit growth.
Inflationary pressure “is still building up and it has become chronic for the medium term,” said Shen Jianguang (沈建光), a Hong Kong-based economist with Mizuho Securities Asia Ltd, in a note on Tuesday, citing rising labor and raw-material costs.
China is winding back stimulus policies after record lending that drove the nation through the slowdown caused by the financial crisis.
Officials have now raised reserve requirements eight times since the start of last year, boosted benchmark interest rates three times and loosened the yuan’s peg to the US dollar. The key one-year lending rate is 6.06 percent.
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