Six big banks to set aside more reserves
The Chinese central bank has asked six lenders to set aside an additional 0.5 per cent of deposits as reserves in a bid to rein in loan growth amid rising inflation and a continuing crackdown on property speculation.
The People's Bank of China yesterday told the six major banks to raise the reserve requirement ratio from 17 per cent to 17.5 per cent, said bank officials and analysts. The six are Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, China Merchants Bank and China Minsheng Banking Corp, the sources said.
The PBOC and bank spokespeople declined to comment.
An increase in the reserve requirement ratio would be more lenient than an interest rate rise widely anticipated since the beginning of the year.
Analysts said the selective measure is also likely to affect the stock market less than a blanket reserve ratio increase for all banks, also widely expected since August.
Lu Ting, an economist with Bank of America Merrill Lynch, said: 'This [selective increase] means there will be no interest rate hike in the short term. The PBOC will continue to focus on quantitative tools instead of rate hikes to manage liquidity and control inflation.'
Combined outstanding deposits in the six lenders totalled 38.1 trillion yuan (HK$44.29 trillion) at the end of August, 56 per cent of the 68.6 trillion yuan of total deposit balance of banks on the mainland. September figures have not been released yet.
An additional 0.5 per cent of deposits set aside as reserves means lending capacity could be reduced by 200 billion yuan to 300 billion yuan, according to analysts.
The move shows the PBOC is determined to contain new loans this year at 7.5 trillion yuan, Lu said.
Beijing has been tightening liquidity on fears of inflation and an asset bubble after a record high of 9.6 trillion yuan in new loans was extended last year to help finance the economic stimulus package.
Central bank governor Zhou Xiaochuan said last week in Washington that existing monetary policy tools were adequate even after inflation accelerated to a 22-month high of 3.5 per cent in August, suggesting China may keep rates at crisis lows.
The one-year lending rate is 5.31 per cent while the deposit rate is 2.25 per cent.
'There is no evidence to show the current quantitative tools, including the reserve requirement and the open market operation to mop up liquidity, are insufficient to control inflation expectations,' Zhou said.
Peng Wensheng, an economist with China International Capital, said the large interest rate differential with the US is a constraint against China increasing interest rates as higher rates would attract more capital inflows and push asset prices higher on the mainland.
Wu Yonggang, an analyst at Guotai Junan Securities, said the latest move was possibly related to the continuing measures to cool the property market.
Beijing has raised the down payment requirement for home purchases, increased mortgage rates, restricted people in some cities to buying only one apartment and will likely introduce a property tax on a trial basis to further curb speculation in the sector.
