Once again China tries to take the heat out of the economy. The People’s Bank of China (PBOC) announced China will raise the reserve requirement ratio by half a percentage point to 13% for commercial banks from October 25.

This is the eighth such move this year and only one month after the seventh hike of half a percentage point on September 25.

The central bank said in a statement that the move is aimed at ’strengthening liquidity management in the banking system and checking excessive credit growth’. Or taking the heat out of the economy.

After this eighth rise, the reserve requirement ratio has reached a ten-year high.

The move came after the central bank’s announcement that the country’s foreign exchange reserve has exceeded 1.43 trillion U.S. dollars by the end of September, up 45.1% from the same period last year.

By the end of September, the M2 — a broad measure of money supply, which indicates the monetary demand of the whole country — grew by 18.45% from a year ago to RMB39.31 trillion.

China’s commercial banks lent out RMB3.36 trillion in the first nine months, surpassing the full-year figure in 2006.
Source: China View