Growing oil addiction

The unprecedented surge of international oil prices by $10.75 a barrel last Friday shook almost all stock markets around the world with a good reason. But the sharp fall of Chinese shares that followed does not mean that domestic investors are frightened by rocketing oil prices too.

The benchmark Shanghai Composite Index plunged 7.7 percent yesterday after the three-day holiday of the Dragon Boat Festival in the steepest drop in more than a year.

However, the panic selling is largely a result of investors' concerns over the impacts of the reserve-requirement ratio hike announced on Saturday by the People's Bank of China. With the fifth such move this year, the central bank has decided to bring the ratio to a record high of 17.5 percent to curb liquidity growth.