China raises bank reserve ratios to curb inflation

The People’s Bank of China (PBoC) raised bank reserve requirements by 0.5%, to take effect from February 24, in a bid to tackle rising inflation and asset bubbles, Bloomberg reported. The decision follows a lending surge in January and accelerating inflation. Overall inflation hit 4.9% year-on-year in January, with new home prices rising in all but two of 70 monitored cities. “This is just the start from China and they will continue tightening lending and raising interest rates, doing their utmost to contain this,” said Philippe Gijsels, the Brussels-based head of research at BNP Paribas Fortis Global Markets. The governor of China’s central bank, Zhou Xiaochuan, suggested that China would utilize a variety of approaches to tackling the problem, “including rates and currency.” The move will take reserve ratios for the biggest banks to 19.5%, while the PBoC has said it may seek to control credit growth this year through additional, bank-specific requirements.