Chinese banks’ reserve ratio rises by 0.5%

by Richard Kilner

Story link: Chinese banks’ reserve ratio rises by 0.5%

On Monday, the People’s Bank of China announced that the mandatory reserve held by banks is to be increased by 0.5%.

From 20 May banks will be required to stay within a 16.5% reserve requirement ratio.

The move by the Chinese authorities has been made in an effort to put a brake on rising inflation, as well as to dampen down the expanding credit market.

From March to April of this year inflation rose slightly from 8.3% to 8.5%.

In 2008, only February has not seen the mandatory reserve increased, with rises in January, March, April and now May.

The Chinese authorities had stated their inflationary target for this year was 4.8%, but the rising costs of food (exacerbated in China by the crop-ruining winter weather) and other goods has pushed inflation up sharply.