21 Percent: Reserve Requirement Ratio For Chinese Banks

Well one thing is sure - the Chinese central bank definitely wants to cool down an overheated economy, and they want to cool down the economy on steroids. Imagine this: the reserve requirement ratio for chinese banks just went up by another half a percent, to 21 percent!!

"The increase, the eighth since October, will raise the reserve requirement ratio to a record 21 percent for China's biggest banks.

The increase will take effect from May 18, the central bank said in a terse statement on its website.

By forcing banks to lock up deposits they would otherwise have lent, China hopes to drain its economy of excess money, one of the main drivers of high inflation"

How do we digest this statistic? compare this number with the liquidity requirements in the US:

"For institutions with up to $10.7 million, there is no minimum reserve requirement. Institutions with over $10.7 million and up to $55.2 million in net transaction accounts must have a liquidity ratio of three percent. Institutions with more than $55.2 million in net transactions must have a liquidity ratio of 10%."

Source: Wikipedia

Statistics Source: Reuters