China Sets Curbs on Credit Growth, Roach has called this action "serious" and the action in nat resource issues yesterday suggested traders are looking for ST peaks IMTO
Higher Bank Reserve Ratio Targets Weak Institutions;
Short-Term Rates Increase
A WALL STREET JOURNAL NEWS ROUNDUP
March 24, 2004 2:44 p.m.
Stepping up its battle to curb money and credit growth, China announced new measures to pull funds out of the banking system and reward lenders that have strong balance sheets. In a statement on its Web site, the People's Bank of China said the reserve requirement, or the amount of deposits that must be held with the central bank, will be increased for banks with low capital-adequacy ratios. The increase to 7.5% from 7% is the second time the central bank has raised China's reserve requirement ratio in the past six months, but this time it is specifically targeting commercial banks with weak financial statements. In a further measure aimed at clamping down on credit, the central bank said that beginning Thursday it will raise the rediscount rate on short-term bills by 0.27 percentage point to 3.24%. The rediscount rate is what commercial banks pay the central bank in return for cashing in commercial bills before maturity.
The central bank will also increase by 0.63 percentage point the relending rate, the current benchmark for lending at terms of no more than a year. The steps signal Beijing's intensifying effort to soak up money in the banking system amid skyrocketing investment in industry and creeping inflation. China's leaders are concerned that a high pace of lending, up more than 20% in 2003, is supporting a boom in sectors susceptible to a bust, such as property, cement and steel.
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