Friday, February 16, 2007

China Raises Lenders' Reserve Ratio to 10 Percent / 5th time in 8 month!

5th time in 8 month. looks like where a little bit lax and now play catch up.........but at least they are acting.

das fünfte mal in 8 monaten... denke die haben die dynamik wohl unterschätzt und laufen nun der musik hinterher...immerhin reagieren sie.

Feb. 16 (Bloomberg) -- China ordered banks to set aside more money as reserves for the fifth time in eight months to cool inflation and investment in the world's fastest-growing major economy.

Lenders must put aside 10 percent of deposits from Feb. 25, up from 9.5 percent
Central bank Governor Zhou Xiaochuan wants to stop a trade surplus that may top $200 billion this year from fueling inflation, bad loans and asset bubbles. China's economy, the world's fourth largest, expanded at the fastest pace in 11 years in 2006. The government is using interest rate increases, bill sales and curbs on bank lending to rein in the supply of money. .....
``The war on investment isn't over,'' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour

The People's Bank estimates each 50 basis point increase in the bank reserve ratio cuts the amount available for lending by 150 billion yuan. China's economy expanded 10.7 percent last year, more than triple the pace of growth in the U.S.

The yuan stayed stronger, up 0.12 percent to 7.7460 per dollar at 4:54 p.m. in Shanghai. ( but put this into perspective....../ bitte mal ins verhälnis setzen...)

Consumer Prices
Consumer prices rose more quickly in December and January than in the previous 20 months. Producer prices jumped by the most in five months in January. Investment and lending may rebound, increasing the risk of accelerating inflation, the central bank said this month.

Growth in yuan loans accelerated to 16 percent in January, from 15.1 percent the previous month, the central bank said in a statement yesterday.

``The growth in the money supply has put a tremendous amount of pressure on the central bank,'' ...

The People's Bank raised borrowing costs in April and August. .....

Record overseas sales pump cash into China's financial system, raising the risk of boom-and-bust cycles in property and stocks. The Shanghai and Shenzhen 300 Index rose 11.7 percent this week to a record in the biggest advance since the measure was introduced in April 2005. The benchmark tumbled 12 percent in the five days ending Feb. 5 after a senior lawmaker cautioned of a ``bubble.''

China's trade surplus will increase this year to $200 billion from $177.5 billion in 2006, estimates Glenn Maguire, of Societe Generale SA in Hong Kong. The U.S. trade deficit with the Asian nation reached a record $232.5 billion last year. U.S. lawmakers want China to let the yuan strengthen further to make the country's exports more expensive.

``The right diagnosis for China is to allow the currency to appreciate to slow exports,'' ....

`Reasonable' Loan Growth
The People's Bank said in today's statement that it wants ``reasonable'' loan growth and plans to implement ``stable monetary policy'' and to strengthen control of liquidity.

``At the moment, the surplus in the international balance of payments is still outstanding,'' the central bank said. ``The pressure of loan expansion is relatively large.'' (overheating.......sieht ganz nach überhitzung aus....)

Besides monetary policy, China uses administrative measures to rein in investment. Developers face tighter land-appreciation taxes this year and minimum prices for property to be used for industrial developments. Environmental controls will curb spending on factories, ..

Growth in urban fixed-assed investment declined to 24.5 percent in December from a peak of 31.3 percent in June. Still, the slowing of loans and spending is ``not stable,''

Manufacturing activity expanded at a faster pace in January than December, the Purchasing Managers' Index showed. The increase signaled a rebound in investment and showed the need for further ``tightening measures,'' ...

The People's Bank prints yuan to convert foreign currency derived from exports of clothes, electronics and steel. It then sells bills to lenders to remove money from the financial system. That tool is less attractive to the government than lifting bank reserve requirements because it costs more, economists say.

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Anonymous Anonymous said...

In the early days of the Federal Reserve system, when the banking system provided most of the credit in the U.S., hikes in reserve requirements had a highly leveraged effect. For instance, when the Fed hiked both the discount rate and reserve requirements in early 1937, the economy tumbled into recession, and the Dow fell 50% in 13 months.

In China, banks still provide a large share of credit. Thus, repeated hikes in reserve requirements are likely to bite. Nevertheless, it's praiseworthy that the Chinese authorities recognize and take action against a Bubble. Whereas the U.S. authorities remain blind, deaf and dumb to asset inflation, continuing their hedge fund-friendly remarks even as the edge of the cliff approaches at 200 km/h.

3:44 AM  
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i agree.

it´s no surprise that the us eliminated the requirements back in 1995.

here the brilliant piece from aaron

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