The country's central bank said on Saturday it will raise banks' reserve requirement ratio, or the amount lenders must hold in reserve, for the eighth time this year.
The ratio would be raised by a 0.5 percentage point to reach 13 percent, which will take effect on October 25, the People's Bank of China said.
The adjustment is estimated to absorb about 170-180 billion yuan ($21-23 billion) in liquidity and makes the ratio on par with the historical high, which occurred during the 1988-98 period.
"This shows the authorities are determined to properly manage the macroeconomy," Zhu Jianfang, chief economist with CITIC Securities in Beijing, said.
Analysts said the hike came as no surprise because monetary supply was accelerating and liquidity continued to flood the domestic market.
Statistics released by the central bank on Friday showed annual growth in broad measures of money supply accelerated to 18.5 percent in September, 0.4 percentage points higher than August.
Yuan loans rose 17.1 percent after a 17.0 percent growth in August.
The trade surplus, meanwhile, amounted to $185.7 billion in the first nine months, more than the whole of last year, pushing the country's foreign exchange reserves to $1.43 trillion.
Usually, any tightening step would take place after all macroeconomic data was released.
This time, it has come earlier, and analysts said that showed the policymakers were facing exceptional pressure.
"The ratio seems to have been raised earlier, which indicates the pressure on macroeconomic regulation is very heavy," Li Mingliang, senior economist with Shanghai-based Haitong Securities, said.
Analysts also said the approximate 400 billion yuan ($51 billion) worth of central bank bills due to mature this month may have contributed to the tightening measure.
Analysts said the adjustment would play a role in reducing liquidity, but the effect would be "limited".
Li Huiyong, senior analyst with the Shanghai-based Shenyin and Wanguo Securities, said more hikes could be expected, pushing the figure to 15 percent by the first half of 2008.
More interest rates may also be announced in the coming months in a combined tightening package to prevent the surging economy from going too fast to sustain, analysts said.
A hike in interest rates may occur soon, Zhu Jianfang, said.
The central bank has raised interest rates five times so far this year.
Source: China Daily
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