China Raises Cash Reserve Ratio

By Liu Peng
TEXT:  small   |  medium   |   large
Published: 2010-01-12
Correction: We've updated the current reserve ratio requirement figures. When originally published, we stated that the current reserve ratio stood at 14.5% and that after the adjustment this would rise to 15%. In fact the ratio currently stands at 15.5% and will rise to 16% on January 18.

The People's Bank of China announced earlier this evening that as of January 18, it would raise the deposit reserve ratio for deposit-taking financial institutions by 0.5 of a percentage point. The adjustment does not apply to small-scale financial institutions like rural credit cooperatives .

This is the first time that China's central bank has adjusted the deposit reserve ratio since Christmas Day 2008 when it reduced the ratio for large financial institutions by 0.5% to 15.5%. With this latest adjustment, the deposit reserve ratio for large deposit-taking financial institutions once again returns to 16%.


The move, which is designed to curb credit growth, appears to have surprised analysts, with Reuters quoting one Shanghai trader as saying that a hike in the reserve rate ratio was "unlikely to occur before the Lunar New Year."

Links and Sources
People's Bank of China: Announcement (Chinese)
Reuters: China central bank steps up cash drain