People's Bank raises reserve requirement

People's Bank of China (PBOC), raised reserve requirements this Monday in a move intended to cool down the economy, AP reported. Under the new requirement banks are required to keep 12% of deposits as reserves, an increase of 0.5 percentage points. Banks will have until August 15 to comply with the increase. The move was an expected follow-up to an interest rate hike on July 20, the third this year, as economic growth for the first half of 2007 reached 11.9%, the highest in 12 years. The central bank is concerned that an overheated economy may provoke higher inflation or cause excessive speculation in real estate or equities.