Bank of China raised loans restrictions again – May 22

The People Bank of China raised again the reserve requirements ratio of commercial banks in China by 0.5 percent points to 21%. This is the fourth raise during 2011. This is one of the tools that the PBC is using in order to curb the growing new loans given by banks and the soaring inflation rate.

China’s inflation rate reached in April an annual rate of 5.3%, which is higher from the government’s target inflation of 4% (Y-2-Y).

The broad money base (M2) of China is still very high and stood by the end of April on 75.73 trillion Yuan, which is an increase of 15.3% (Y-2-Y), however the M2 was lower by 1.3% compared to March 2011.

The new loans given by banks during last month reached by the end of April 53.37 trillion Yuan, an increase of 17.2% in annual terms.

China is also paying close attention to the loans given to local government and urged the banks to rein in loans growth to this sector. The current loans to local governments reached 7.66 billion RMB (nearly 1.1 billion US dollar).

During the first quarter of 2011 the 16 listed banks in China recorded a combined profit of 229.3 RMB billion (nearly 35 billion USD) some of it is probably due to the increase in the loans given.

China’s foreign exchange reserves continue to rapidly rise as it rose by 197.4 billion US dollar during the first quarter of 2011, to reach 3.0447 trillion US dollar.



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