China raises banks' required reserve ratio

The People’s Bank of China raised the required reserve ratio for mainland banks on Friday evening for the fourth time in under three months, Reuters reported. The hike of 50 basis points raises the ratio to 19.5%, marking a record high. Economists reckoned that the move would siphon off roughly US$53 billion from the Chinese economy in an attempt to cool the country’s uncomfortably high levels of inflation. Efforts to keep the value of the renminbi suppressed has led to a surge in China’s foreign exchange reserves to US$2.85 trillion at the end of 2010. While the central bank has engaged in "sterilization" – selling renminbi-denominated debt to domestic buyers – to prevent importing inflation, many analysts expect the consumer price index to continue rising in the near term.