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China fights inflation via bank reserves


China fights inflation via bank reserves


In its continued efforts to fight inflation, China’s central bank has again raised the amounts that banks must keep in reserve.

It was the fourth time in just over two months that lenders’ required reserves had gone up.

By forcing banks to lock up more of their reserves with the central bank, Beijing hopes to drain the economy of excess money and tame rising prices, which it worries may stir social unrest.

Abundant cash is seen as the main driver of China’s inflation, which hit a 28-month high of 5.1 percent in November as food and property prices soared.

The 50-basis-point increase will raise the reserve requirement ratio for China’s biggest banks to a record high of 19.5 percent.

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