Top Biz News

Reserve ratio hiked to absorb liquidity

(China Daily - Xinhua)
Updated: 2007-02-26 09:53

Deputy chief representative of the Asian Development Bank in China Tang Min said the PBOC wants to use the moderate reserve ratio hikes as a warning against excessively rapid increases in loans and rebounding investment.

China Galaxy Securities chief economist Zuo Xiaolei said: "The hike was expected and won't have much repercussion on the market."

Standard Chartered Bank economist Stephen Green felt the reserve ratio hike has reduced the chances of immediate increase in interest rates after the lunar new year. He expects the PBOC to raise its interest rate at lease once this year.

Ma Jun, a Deutsche Bank economist, stands by the bank's previous projection that the interest rate will be raised twice, that is, a total increase of 54 basis points this year.

The Deutsche Bank considers interest rate hikes a proper tool to deal with the country's rising inflation and upsurge in investment, he said.

Analysts, too, think financial institutes, rather than individuals, would be directly affected because rising reserve ratio forces banks to set aside more of their deposits with the PBOC and rein in their loans.

(China Daily 02/26/2007 page1)