China Increases Bank Reserve Ratio

China's major lenders have been ordered to stash more money at the central bank, amid a US$27.1 billion trade surplus and renewed concern about inflation, reports the Wall Street Journal.


Citing a statement issued by the People's Bank of China, the Journal says that starting next week, the reserve requirement ratio for banks will rise by half a percentage, putting the standard ratio for large banks up to 17.5%.


The tightened bank reserve rule will drain funds from the financial system, helping relieve some of the inflationary pressures that are expected to show up in a high reading on the consumer price index, which is expected to be up 4% from a year earlier, notes the Journal.




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