Sunday, December 10, 2006

china is putting on the breaks / bank reserve requirements

they are taking action. but i think all the babysteps are not solving the problem.more on china here or under the label at the bottom of the post

immerhin unternehmen die etwas. denke aber das all diese minischritte das problem letztendlich nicht lösen werden. mehr zu china unter dem link oben oder dem label unten im posting.

Chinese banks told to buy $20B in bonds

China's central bank confirmed Saturday it has told banks to buy $20 billion in bonds in the government's latest effort to rein in a lending boom and cool off the sizzling economy,....

Beijing is trying to curb a surge in investment that it worries could ignite inflation or a debt crisis as economic growth races ahead at an annual rate of more than 10 percent.

The government already has raised interest rates twice this year and boosted the amount of reserves that banks must deposit with the central bank in an effort to cut runaway lending.

The latest order applies to 20 institutions, including China's top five state-owned banks and 10 other commercial banks,

The size of the 160 billion yuan ($20 billion) bond issue was nearly double the 100 billion yuan ($12 billion) figure cited Friday by bankers who first disclosed the order.

The bond sale is meant to help cool off a boom in real estate development and bank credit by shrinking the pool of money available for lending. It was the fourth time this year the central bank has ordered banks to buy bonds.

The Chinese economy grew at a 10.7 percent rate in the first nine months of the year.

The government wants fast growth to continue, but is trying to rein in runaway investment in real estate and some other industries, worried that it could lead to a glut of unneeded assets, leaving banks and companies with dangerously high debt.

So far this year, the central bank has issued 410 billion yuan ($52 billion) in bonds designated to reduce lending, according to Xinhua.

Banks' reserve requirements have been raised by 1.5 percentage points to 9 percent of deposits.
compare this to the fedpolicy. vergleicht das mit der fedpolitik this is from "the great piece from aaron krowne about reserve requirementsand the massive impact on lending" (long but very good read!)
"The key event that happened around 1995 is that the fractional reserve ratio was not only lowered, it was effectively eliminated entirely. You read that right. .....As a consequence, banks can effectively create money without limitation. "
Xinhua said that has taken a total of 450 billion yuan ($57 billion) out of the economy.

The latest bond issue is the equivalent of raising the reserve ratio by another 0.5 percentage points, the agency said.

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