China yesterday raised the proportion of deposits that banks must hold in reserve in the clearest sign yet that it has started to tighten monetary policy with its economy roaring back to the brink of overheating.
The 0.5 percentage point increase in the reserve requirement ratio (RRR) will take effect on Monday and will apply to all banks apart from rural credit cooperatives, the People’s Bank of China said on its Web site.
It was the first time that the central bank adjusted the ratio since it lowered the ratio in December 2008 as part of its loosening cycle at the time.
Many in the market had thought that China might increase the RRR before it lifted interest rates, but the move came far earlier than expected amid concerns that a renewed surge in bank lending was flooding the economy with too much cash.
“This is exactly what happens with Chinese policy. They say fine tuning. It never happens that way. It’s always nothing or boom,” said Ken Peng (彭墾), an analyst with Citigroup in Beijing.
“When they reach a consensus, it happens very quickly,” he said.
Shi Lei, an analyst at Bank of China in Beijing, said there could two or three more RRR increases before June.
“The reserve ratio hike is a strong signal the central bank is stepping up efforts to absorb excessive liquidity,” Shi said. “The hike may drain about 200-300 billion yuan [US$29 billion to US$44 billion] from the market but it really needs to drain about 700-800 billion yuan.”
The RRR increase also followed two other tightening steps taken by the central bank yesterday.
The central bank raised the yield on 20 billion yuan in one-year bills by about 8 basis points (bps) to 1.8434 percent after holding it steady in the previous 20 auctions, compared with a median forecast among traders that it would go up by just 4bps.
It also drained a record 200 billion yuan via 28-day bond repurchase agreements, ensuring it will draw net funds from the market this week.
The Ministry of Foreign Affairs (MOFA) yesterday said it is closely monitoring developments in Venezuela, and would continue to cooperate with democratic allies and work together for regional and global security, stability, and prosperity. The remarks came after the US on Saturday launched a series of airstrikes in Venezuela and kidnapped Venezuelan President Nicolas Maduro, who was later flown to New York along with his wife. The pair face US charges related to drug trafficking and alleged cooperation with gangs designated as terrorist organizations. Maduro has denied the allegations. The ministry said that it is closely monitoring the political and economic situation
UNRELENTING: China attempted cyberattacks on Taiwan’s critical infrastructure 2.63 million times per day last year, up from 1.23 million in 2023, the NSB said China’s cyberarmy has long engaged in cyberattacks against Taiwan’s critical infrastructure, employing diverse and evolving tactics, the National Security Bureau (NSB) said yesterday, adding that cyberattacks on critical energy infrastructure last year increased 10-fold compared with the previous year. The NSB yesterday released a report titled Analysis on China’s Cyber Threats to Taiwan’s Critical Infrastructure in 2025, outlining the number of cyberattacks, major tactics and hacker groups. Taiwan’s national intelligence community identified a large number of cybersecurity incidents last year, the bureau said in a statement. China’s cyberarmy last year launched an average of 2.63 million intrusion attempts per day targeting Taiwan’s critical
‘SLICING METHOD’: In the event of a blockade, the China Coast Guard would intercept Taiwanese ships while its navy would seek to deter foreign intervention China’s military drills around Taiwan this week signaled potential strategies to cut the nation off from energy supplies and foreign military assistance, a US think tank report said. The Chinese People’s Liberation Army (PLA) conducted what it called “Justice Mission 2025” exercises from Monday to Tuesday in five maritime zones and airspace around Taiwan, calling them a warning to “Taiwanese independence” forces. In a report released on Wednesday, the Institute for the Study of War said the exercises effectively simulated blocking shipping routes to major port cities, including Kaohsiung, Keelung and Hualien. Taiwan would be highly vulnerable under such a blockade, because it
UNDER WAY: The contract for advanced sensor systems would be fulfilled in Florida, and is expected to be completed by June 2031, the Pentagon said Lockheed Martin has been given a contract involving foreign military sales to Taiwan to meet what Washington calls “an urgent operational need” of Taiwan’s air force, the Pentagon said on Wednesday. The contract has a ceiling value of US$328.5 million, with US$157.3 million in foreign military sales funds obligated at the time of award, the Pentagon said in a statement. “This contract provides for the procurement and delivery of 55 Infrared Search and Track Legion Enhanced Sensor Pods, processors, pod containers and processor containers required to meet the urgent operational need of the Taiwan air force,” it said. The contract’s work would be
RSS