Reserve ratio may increase this week
By Zhang Fengming |
March 8, 2011, Tuesday
|
Print Edition
Print Edition
CHINA'S central bank may raise bank reserve requirement ratio as early as this week as it continues to step up its fight against inflation because China has prioritized keeping prices stable in this year's government agenda, analysts said yesterday.
In his government work report delivered to the annual session of the National People's Congress over the weekend, Premier Wen Jiabao reaffirmed the central government's determination to battle inflation this year.
"It's rare to see 15 mentions of pricing in the government's prudent work report," said Lu Zhengwei, Industrial Bank's senior economist said yesterday.
"As short-term policy follow-up, one more reserve requirement increase is likely to come between March 11 and March 20," Lu said.
China has already raised its interest rates three times since October. It has also demanded banks freeze more capital with the central bank by hiking the reserve requirement ratio eight times since 2010 to combat inflation.
Citibank said in a note yesterday that the prudent monetary policy is key in keeping prices stable.
"We expect the front-loaded monetary tightening to continue, with three more interest rates increases and a couple more reserve requirement increases during the year, supported by a 5 percent annual appreciation against the US dollar," Citibank said.
China shifted its monetary policy from accommodative to prudent this year to avoid a liquidity-driven inflation.
Meanwhile, Liu Mingkang, head of the China Banking Regulatory Commission, was quoted by China Securities Journal yesterday as saying that China is cutting the size of outstanding loans to local government financing vehicles to curb risks.
Chinese banks were asked not to extend any new loan to these vehicles unless they were for affordable homes project, Liu said.
Liu added this year's new loans may amount to 7.5 trillion yuan (US$1.14 trillion), based on a target of 16 percent growth in M2, the broadest measure of money supply.
In his government work report delivered to the annual session of the National People's Congress over the weekend, Premier Wen Jiabao reaffirmed the central government's determination to battle inflation this year.
"It's rare to see 15 mentions of pricing in the government's prudent work report," said Lu Zhengwei, Industrial Bank's senior economist said yesterday.
"As short-term policy follow-up, one more reserve requirement increase is likely to come between March 11 and March 20," Lu said.
China has already raised its interest rates three times since October. It has also demanded banks freeze more capital with the central bank by hiking the reserve requirement ratio eight times since 2010 to combat inflation.
Citibank said in a note yesterday that the prudent monetary policy is key in keeping prices stable.
"We expect the front-loaded monetary tightening to continue, with three more interest rates increases and a couple more reserve requirement increases during the year, supported by a 5 percent annual appreciation against the US dollar," Citibank said.
China shifted its monetary policy from accommodative to prudent this year to avoid a liquidity-driven inflation.
Meanwhile, Liu Mingkang, head of the China Banking Regulatory Commission, was quoted by China Securities Journal yesterday as saying that China is cutting the size of outstanding loans to local government financing vehicles to curb risks.
Chinese banks were asked not to extend any new loan to these vehicles unless they were for affordable homes project, Liu said.
Liu added this year's new loans may amount to 7.5 trillion yuan (US$1.14 trillion), based on a target of 16 percent growth in M2, the broadest measure of money supply.
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