By Xinhua
Beijing : China will raise the reserve requirement ratio by one percentage point for commercial banks in an effort to cool the booming economy, the central bank announced Saturday.
The move, which will take effect on Dec. 25, will push the ratio to a new high of 14.5 percent, after it reached a ten-year high of 13.5 percent on Nov. 26.
This is the country’s tenth rise in the reserve requirement ratio this year. It is aimed at “strengthening liquidity management in the banking system and checking excessive credit growth”, the People’s Bank of China said in a statement posted on its website.
The move follows the government’s announcement at an annual economic conference concluded on Wednesday, which said the country would shift its monetary policy stance from “prudent”, an approach it has followed for the last ten years, to “tightening”.
It is the first time China has raised the reserve requirement ratio by as much as one percentage point since September, 2003. The other nine rises this year were half a percentage point each.
It means that a tighter monetary policy has been adopted, said Song Guoqing, Professor of the Peking University.
The move, launched at the end of the year, is also to prevent a boom in credit, which usually rebounds at the beginning of a year, he said.