China: Central bank raises percentage of obligatory reserves

19 March 2008

Beijing, China, 19 March – The Chinese central bank announced on Tuesday in Peking that it was raising its obligatory reserves that a retail bank is requires to hold, by 15.5 percent, the second decision of this kind since the start of the year.

According to a statement on its website the measure by the People’s Bank of China aims to strengthen the regulation of liquidity in the banking system and allow the bank to provide credit at more reasonable rates.

The central bank’s decision echoes statements made by prime minister Wen Jiabao who, at a press conference Tuesday, said that the government would combat prices increases and the consequent inflationary pressure.

The vice-governor of the central Bank, Yi Gang, had previously stated that country’s main job in 2008 would be to combat inflation and that rigid monetary policy would not change in spite of the sub-prime mortgage crisis and the snowstorms that occurred at the beginning of the year.

In its attempt to combat inflation, the central bank increased its obligatory reserves on 12 occasions and interest rates six times last year. (macauhub)