BEIJING, Jan. 13 (Xinhua) -- The decision of the People's Bank of China (PBOC), the central bank, to increase the deposit reserve requirement ratio has drawn worldwide attention and fluctuations in global markets.
The PBOC decided on Tuesday to raise the deposit reserve requirement ratio by 0.5 percentage points as of Jan. 18, which analysts translated as a move to manage inflationary expectations and avoid a recurrence of the lending boom.
This was the first time that the PBOC adjusted the ratio of deposit that lenders are required to set aside since the end of 2008 and the first increase for the ratio since June 2008.
The PBOC cut the bank reserve requirement ratio four times in the second half of 2008 to stimulate growth as the global financial crisis started to weigh on the economy.
The adjustment of the reserve requirement ratio, without changing benchmark interest rates, indicated the central bank was targeting inflationary expectations instead of inflation, said Zhao Qingming, a senior researcher at the China Construction Bank.
Ma Jun, chief economist with Deutsche Bank (Great China), said that the rise in the reserve requirement ratio has ended the expansionary monetary policy and started a tightening cycle.
Global markets took a hit after the Chinese attempt to cool the world's fastest-growing major economy.
Chinese equities saw their sharpest dip in seven weeks on Wednesday after the central bank asked lenders to set aside more reserves as record bank lending last year ignited fears of inflation and asset bubbles.
The benchmark Shanghai Composite Index went down 3.09 percent, or 101.31points, to close at 3,172.66 points.
The Shenzhen Component Index lost 2.73 percent, or 364.69 points, to close at 13,016.56 points.
Hong Kong stocks shed 578.04 points, or 2.59 percent, to close at 21,748.60 on Wednesday.
The Hong Kong market was also dragged by overnight losses on the United States markets. The benchmark Hang Seng Index opened down 1.42 percent and widened its losses to 2.24 percent by lunch break, and further to 2.59 percent by market close.
South Korea's financial markets on Tuesday reacted as the Chinese central bank raised the deposit reserve requirement ratio, with the stock markets and foreign exchange rate plunging from the last close.
The benchmark Korea Composite Stock Price Index (KOSPI) and the Korean Securities Dealers Automated Quotations (KOSDAQ) jointly marked a plunge of 27.23 points and 3.65 points, respectively, from the last close.
The report from China also affected the foreign exchange market, with the local currency also sliding against the U.S. dollar by 1.9 won.
The New Zealand share market also fell on Wednesday after the Chinese move.
The share market closed 0.43 percent lower with the benchmark NZSX-50 down 14.1 points at 3,276.2.
Canadian stocks fell for the second day, weighed down by a metal and mining sector that was hit by the Chinese central bank's decision to cool economic growth.
The S&P/TSX Composite Index declined 126.94 points, or 1.06 percent, to 11,820.18 on Tuesday. Earlier the index shed 173 points to 11, 774, the lowest level this year.
U.S. stocks retreated Tuesday, with S&P falling for the first time in 2010, as disappointing Alcoa fourth-quarter results and rising U.S. trade deficit cooled optimism for a strong earnings season and a sustainable economic recovery.
Crude tumbled the most in five weeks on concerns that demand from China, the world's second-largest oil consumer, will wane as the government moves to curb lending.
Benchmark crude for February delivery fell 1.73 dollars to settle at 80.79 dollars a barrel on the New York Mercantile Exchange. It's the first time this year a barrel has closed below 81 dollars a barrel.
Meanwhile, analysts widely hold that the Chinese central bank's decision is to cast only a short-term, instead of mid-term, stroke on the domestic stock market, as the impact would largely be psychological.
Zhuang Jian, a senior economist with the Asian Development Bank, said the adjustment did not indicate a shift in the moderately easy monetary policy, but was an effort to control the pace of lending.
Through the reserve requirement ratio increase, the central bank intended to call for balanced lending at commercial banks, which would support economic growth while avoiding higher inflationary expectations, Zhuang said.
BEIJING, Jan. 13 (Xinhua) -- China has moved and is expected to take more steps to rein in excessive money supply, which resulted in rising concerns of inflation and a bubble in the property market, experts say.
The latest move came from the People's Bank of China, the central bank, which announced late Tuesday to raise the deposit reserve requirement ratio by 0.5 percentage points from Jan. 18 this year, the first increase since June of 2008.Full story
BEIJING, Jan. 12 (Xinhua) -- The People's Bank of China (PBOC), the central bank, announced on Tuesday to raise the deposit reserve requirement ratio by 0.5 percentage points from Jan. 18 this year.
The ratio at small financial institutions such as the rural credit cooperatives would remain unchanged to support the agriculture sector, the PBOC said in a statement.Full story
BEIJING, Jan. 6 (Xinhua) -- The People's Bank of China, the central bank, reiterated on Wednesday that it would maintain a moderately loose monetary policy in 2010 and improve the focus and flexibility of the policy according to new circumstances.
The monetary policy in 2010 would aim to maintain a stable and relatively rapid rate of economic growth, improve the economic structure and manage inflation expectations, the central bank said in a statement on its website after the conclusion of its annual work conference from Jan. 5-6. Full story
BEIJING, Jan. 7 -- China's central bank Wednesday said it will manage inflation expectations and keep a close watch on the property market through its credit and money supply policies.
In a statement on its website, the People's Bank of China (PBOC) said it would try to maintain ample liquidity in the financial system, and ask banks to lend more evenly, while strictly implementing credit policies in the property sector. Full story
A customer checking out a model of a real estate project in Shenzhen, Guangdong province. Property prices in China's 70 major cities rose at the fastest pace in 16 months in November. (China Daily/Qiu Daocen) Photo Gallery>>>
BEIJING, Jan. 10 (Xinhua) -- The General Office of the State Council, China's cabinet, Sunday issued a notice that required central governmental departments and local governments to strengthen management, stabilize market expectations and facilitate stable and sound development of the real estate market.
"With the recovery of the real estate market, such problems as excessively rising house prices have recently emerged in some cities, which call for great attention," said the notice. Full story
Chinese Commerce Minister Chen Deming (L) meets with Turkish State Minister Zafer Caglayan in Ankara, capital of Turkey, on Jan. 7, 2010. (Xinhua/Zheng Jinfa) Photo Gallery>>>
ANKARA, Jan. 7 (Xinhua) -- China's Commerce Minister Chen Deming said here Thursday the stability of the Chinese currency contributes to the recovery of the world economy while voicing concerns over the strength of the U.S. dollar.
"The Chinese government has stated on many occasions it will keep the exchange rate of the yuan, or Renminbi, basically stable," said Chen during a visit to the Turkish capital Ankara, adding "We feel that is an important support and contribution for the world economy, which is undergoing a crucial period of recovering." Full story
