Chinese banks to up reserves

12 May 2011

Banks in China are to increase their reserve requirements in an effort to restrain prices.

The People's Bank of China noted the amount cash institutions will need to set aside is to rise by 0.5 percentage points from May 18th, Bloomberg reports.

It will be the fifth time this year that such an escalation has taken place and will mean that levels for the nation's largest lenders will reach a record 21 per cent.

The action has come after inflation and lending in the country had exceeded previous estimates.

Wang Qing, chief China economist at Morgan Stanley, said: "The slowdown we've seen so far doesn't indicate there is a risk of a hard landing, that's why the policy priority at the moment is still to control inflation."

The China Banking Regulatory Commission recently claimed banks in China need to increase their capital base over the next five years so they can lend at a pace that keeps up with the country's economic growth.

By Claire Archer

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