Chinese banks have increased their reserve requirements in order to restrict the flow of cash and cool inflation, and the central bank governor Zhou Xiaochuan has said that monetary tightening will continue for some time.
The reserve ratios are due to rise half a point pushing the requirement to 20.5% for the biggest lenders and this latest move comes just two weeks after interest rate increases. It's hoped these measures will prevent banks from lending aggressively in the next month.
It also seems likely that another interest rate increase may come as soon as next month after figures showed inflation accelerating at its fastest pace since 2008.
The policymakers in China may also consider allowing the Yuan to appreciate more quickly in order to reduce the cost of imported products including oil.
The US in particular thinks the Chinese currency is undervalued and there are expectations that it will rise about 2.3% during the next 12 months. The US Treasury secretary Timothy F.
Geithner has said that a stronger currency would help to counter inflation within China and would also help to reduce economic imbalances that have contributed to the global financial crisis. The Yuan has increased in value by 4.5% against the dollar since last June, which was when the Chinese scrapped their policy of keeping the currency unchanged against the dollar.
The Yuan is close to becoming included in the International Monetary Fund's Special Drawing Rights basket, and this should help China overcome inflation. However some officials feel that the SDR basket should be broadened to not only include China but also the currencies of Russia, India, South Africa and Brazil.
No comments:
Post a Comment