China may further raise banks' deposit reserve ratio if they have too much in
deposits, said Fan Gang, Guangzhou Daily reported, citing a member of the
central bank's monetary policy committee.
Zhang Ming, a professor with the World Economics and Politics research department under the Chinese
Academy of Social Science, said the central bank may tell lenders to put aside
12 percent or 13 percent of deposits by the end of this year, up from the
current 11.5 percent.
The central bank will also issue central bank bonds, in an effort to keep
more bank deposits in reserve instead of seeing them lent out, according to Fan.
banks' reserve requirement ratio was raised by 0.5 percentage points on May 18
this year to 11.5 percent, effective as of June 5.
The central bank can soak up about 180 billion yuan (US$23.32 billion) from
the banking system, but currently the amount of money in the market is ample and
capital prices haven't seen sharp increase.
A total of 440 billion yuan central bank notes will expire this month and
will inject a large amount of money into the market, so insiders predicted the
interest rate for 7-day repo would remain at around 2.3 percent.
Bank traders said that the money market was stable because banks had begun
preparing money after the central bank announced the increases in the deposit
reserve ratio; they also said the influence of the policy was becoming weak.
"Only the issue of large-cap stocks will have a big impact on the money
market," one trader said.
But in May, only some small-cap stocks such as Shenzhen Sea Star Technology
Co Ltd and Sunlord Electronics issued new shares.
The deposit reserve ratio hike in May was the fourth time the central bank
has raised the deposit reserve ratio this year amid other efforts to rein in
excessive liquidity and cool off booming economic growth.
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