Central bank to raise reserve ratio of foreign currency deposits

The People's Bank of China (PBOC), the central bank, is expected to raise the required reserve ratio of foreign-currency deposits from four percent to five percent as of May 15, the China Securities Journal quoted sources as saying on Wednesday.

At the end of March, Chinese financial institutions held 165 billion U.S. dollars in foreign currency deposits. To meet May's new reserve ratio, the banks are required to hold an extra 1.65 billion U.S. dollars.

The PBOC's press office declined to comment whether they had made the announcement. Experts claim the rumoured ratio hike aims to curb excessive financial liquidity in foreign currencies.

As China tightens its grip on Renminbi loans, companies have started to apply for loans in foreign currencies.

Foreign currency loans totaled just over 171 billion U.S. dollars by the end of March, a 11.24 percent rise on the same period last year. New loans taken out during that month amounted to 2.7 billion U.S. dollars, a rise of 800 million from February.

To rein in excessive liquidity and cool the booming economy, the PBOC announced on April 29 it plans to raise the deposit reserve ratio in Renminbi by 0.5 percentage points as of May 15 -- the seventh rise this year.

Experts claim that the ratio rise in foreign-currency deposits also serves to ease appreciation of the Renminbi.

On Tuesday, the central parity rate of Renminbi stood at a new record 7.6951 yuan to one U.S. dollar.

Source: Xinhua