CHINA / National

China boosts commercial banks' reserve ratios
(Shanghai Daily)
Updated: 2006-06-17 08:49

China's central bank said yesterday it will raise reserve requirements for commercial banks as part of its efforts to rein in excessive lending and fixed-asset investment.

The reserve ratio - the amount of money a bank must keep on hand - will increase 0.5 percentage points to 8 percent starting July 5.

The move came as money supply in May increased more than 19 percent from a year earlier, the fastest gain in four months.

In the first five months of this year, new yuan-denominated loans issued by the nation's financial institutions reached 1.78 trillion yuan (US$222 billion), 793 billion yuan more than in the same period of last year, the central bank said.

The government's target for this year is 2.5 trillion-yuan.

Investment in factories, infrastructure and real estate in mainland cities and towns jumped 30 percent year on year from January to May, according to a report issued by the National Bureau of Statistics on Thursday.

The growth exceeded the 29.6 percent gain through April.

The rise in the reserve ratio will require Chinese lenders to set aside an additional 150 billion yuan.

In earlier efforts to cool lending, the central bank raised its benchmark lending rate on April 28 for the first time since October 2004.

The one-year lending rate increased 27 basis points to 5.85 percent as it sought to "maintain the rapid and healthy growth of the economy."


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