China’s central bank tightens liquidity

By Zhang Fengming  |   2010-1-12  |ONLINE EDITION, http://www.shanghaidaily.com/sp/article/2010/201001/20100112/article_425528.htm

CHINA asked banks to freeze more money from lending for the first time in more than a year as the central bank quickens tightening.

The reserve ratio - the amount of money a bank must put at the central bank from lending - will increase 0.5 percentage points on yuan deposits starting January 18, the People's Bank of China said on its Website this evening.

The increase is the first such move since December 2008.

Big banks will meet 16 percent requirement while small banks are required to put aside 14 percent of their capital. Rural banks and rural cooperatives are exempted from the requirement ratio rise to support the development of the rural areas, the central bank said

Reserve-ratio increase proves surprise

By Zhang Fengming  |   2010-1-13  | http://www.shanghaidaily.com/sp/article/2010/201001/20100113/article_425607.htm

CHINA yesterday asked banks to freeze more money from lending for the first time in more than a year in a surprising early reserve requirement increase that may signal a pending interest rate lift.

The reserve ratio - the amount of money a bank must deposit with the central bank- will increase 0.5 percentage points on yuan deposits starting next Monday, the People's Bank of China said yesterday.

The increase is the first rise since December 25, 2008.

Rural cooperatives were exempt from the increase to support the development of farming areas especially during the spring planting season, the central bank said.

Economists said they expected two to three more reserve increases this year and an interest-rate increase was likely in the second quarter.

"The ratio rise sends a signal to the market of the central bank's strategy," said Li Wei, a Standard Chartered Bank economist.