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Updated: October 12, 2010 17:19 IST

China hikes CRR of 6 major banks to curb inflation

Xinhua
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File photo of a bank clerk transferring stacks of renminbi in a bank in Hefei in central China's Anhui province. China has raised the reserve ratio of 6 leasing banks to rein-in liquidity and check inflation.
AP File photo of a bank clerk transferring stacks of renminbi in a bank in Hefei in central China's Anhui province. China has raised the reserve ratio of 6 leasing banks to rein-in liquidity and check inflation.

It is the fourth time this year the reserve ratio for the six banks has been raised to rein in lending and combat inflation. The latest move lifts the four state-run banks’ reserve ratio to 17.5 percent

China’s central bank has temporarily raised the reserve requirement ratio of the four major state-owned lenders and two privately-owned banks, sources told Xinhua on Tuesday. Banks must keep an extra 50 basis points, or 0.5 percent, in reserves, to check lending, the sources said.

The four state-run lenders are Industrial and Commercial Bank of China, China Construction Bank, Bank of China and Agricultural Bank of China (ABC), the sources said.

The two privately-owned banks are China Merchants Bank Co. and Minsheng Banking Corp., China’s first privately-owned bank.

It is the fourth time this year the reserve ratio for the six banks has been raised to rein in lending and combat inflation. The latest move lifts the four state-run banks’ reserve ratio to 17.5 percent.

There was no available public comment from the People’s Bank of China (PBOC) and the six lenders.

Lian Ping, chief economist at the Bank of Communications, said the main reason for the move was reining in liquidity. Guo Tianyong, head of the China Banking Research Center at the Central University of Finance and Economics, said the move would have been a tough decision for the central bank to make and reflects its concerns about inflation.

“The central bank did not use an interest rate hike to check inflation. Instead, it raised the six banks’ reserve ratio, which is a relatively gentle way to affect the economy,” Guo said.

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