Central bank increases reserve ratio

The People's Bank of China (PBOC) has raised its reserve ratio for financial institutions engaged in deposit business by 0.5% to 10% to absorb liquidity, state media reported. Analysts project ratio hikes to rise as high as 11.5% in 2007. The PBOC has increased the reserve ratio five times since July 2006, with the latest move expected to take US$23.22 billion out of the banking pool. In a public statement, the PBOC attributed the hikes to rising currency liquidity caused by "unbalanced international payments generated by mounting trade surplus".