The Central Bank Again Raised The Deposit Reserve Ratio By 0.5 Percentage Points.

The fifth increase in the year could freeze the liquidity of the banking system by about 300000000000 yuan at a time, 2.5% of the total in the year, and 18.5% to 19% of the reserves in some financial institutions.

Increasing inflation and excess liquidity, the central bank once again "sword" aimed at strengthening liquidity management, moderate regulation of money and credit.

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On the 19 day, the people's Bank of China (hereinafter referred to as the central bank) announced that in order to strengthen liquidity management and moderate monetary and credit control, the deposit reserve ratio of deposit financial institutions increased by 0.5% from November 29, 2010.

This is the fifth time the central bank has raised the deposit reserve ratio this year.

After a rough estimate, the central bank can freeze the liquidity of the banking system at a rate of about 300000000000 yuan after the deposit reserve ratio is raised by 0.5 percentage points.

This is the third time that the central bank has raised the deposit reserve ratio for more than a month. It is also the fifth increase in the year, with a total of 2.5%.

After the rise, the reserve ratio of some large financial institutions has reached a historical high of 18.5% to 19%.

The central bank said the move is aimed at strengthening liquidity management and appropriately regulating the supply of money and credit.

In October 11th, the central bank informed the workers and peasants to build four state-owned commercial banks.

Regulatory targets

Another move to curb

On Wednesday, the central bank announced that the deposit reserve ratio of deposit financial institutions should be increased by 0.5 percentage points from November 16th.

Moreover, in mid October, 6 large banks were differentiated to raise the deposit reserve ratio for 2 months.

In October 20th, the central bank announced a 1 year interest rate increase of 0.25 percentage points, raising interest rates for the first time in 3 years.

In less than two weeks, the central bank raised the deposit reserve ratio twice, indicating the central bank's huge concern about domestic inflation and excess liquidity.

In fact, this week's rumor that the central bank will take action on Friday to further suppress inflation has been volatile in global markets and stock markets in the past few days.

The market expected that the central bank would raise interest rates on Friday.

This week's meeting of the State Council stressed the need to curb excessive price rises and take effective measures in a timely manner, which further strengthened external expectations for China to further raise interest rates.

Morgan, managing director and chairman of China Securities and commodities, Li Jing said on Friday that China's policymakers will focus on rising food prices that are closely related to social stability, and that in view of the further increase in foreign capital that will lead to further inflow of foreign capital, the reserve fund will probably be increased.

Li Jing pointed out that the liquidity measured by M2 growth has accelerated since 2009, leading to a substantial expansion of the monetary base in 2010.

Therefore, inflation in recent months is a sign of excess liquidity.

Given that the sharp increase in interest rates will lead to further inflow of foreign capital, Li Jing said that China may focus on increasing reserve requirements, increasing sterilizing efforts, controlling credit issuance and strengthening control of capital inflows.

In addition, the continued appreciation of the renminbi and the increase in foreign investment will also help to reduce inflation.

Tighten liquidity

Limited impact on the stock market

The central bank has raised the deposit reserve ratio for the two time in nine days. This intensive action has been very rare in recent years, which has aroused the attention of various professional institutions.

CITIC Securities chief economist Zhu Jianfang believes that the central bank's move is in line with expectations.

Foreign capital will continue to flow and liquidity is loose. The central bank's move will be able to control this.

Zhu Jianfang said that after the regulation may not be enough to control the influx of international capital, the recent trend of the stock market has also reflected the expectation of raising interest rates.

Zuo Xiaolei, chief economist of galaxy securities, believes that rising inflation pressure and overflowing liquidity are the most important reasons why the central bank frequently uses the reserve ratio, and does not rule out the possibility that the central bank will continue to increase in December.

She also said that the frequent use of the reserve ratio and no rate hike were due to the most effective and direct way to tighten liquidity, and the effect of raising interest rates would be somewhat delayed.

Li Daokui, member of the monetary policy committee of the central bank, believes that the stock market should not be too large at first, because the adequacy of the main commercial banks' reserve requirements and liquidity are very sufficient and will not directly bring about a decline in their profits.

For other investors, the main source of investment is not from the bank loans, so the appropriate increase in the reserve ratio will not have any impact on most investors, nor will it have any impact on the profitability of the listed banks. It will have limited impact on the stock market, but its main role will play a deterrent role in the rise of loans in the following months. This will help the future macroeconomic regulation and control.

Li Daokui pointed out that the central bank mainly aimed at controlling the scale of loans. The purpose of raising interest rates is not exactly the same as raising reserves. The increase in reserves is mainly to control the rise of loans in the coming period. The purpose of raising interest rates is mainly to adjust people's expectation of inflation. The anticipation of inflation for the people can be carried out in other comprehensive ways, and raising interest rates is only one.