China rocked Global Finance by shifting Lending Policy - CURB!

[MM.Thaksin]

http://www.asianewsnet.net/news.php?id=9546&sec=2

China raises bank reserve ratio to curb lending

Zhang Ran
China Daily
Publication Date: 13-01-2010

China's central bank yesterday (January 12) raised the reserve requirement ratio - the proportion of deposits that banks must hold in reserve - in a clear sign that it was determined to drain excessive liquidity in the market and curb lending.

The 0.5 percentage point increase is effective Jan 18, the People's Bank of China (PBOC) said. It was the first time that the central bank raised the ratio since June 2008.

The move is meant to stabilise loan growth but keep overall policy pro-growth, Reuters quoted a central bank official as saying.

"Our monetary policy stance is still appropriately loose and the move is intended to use quantitative tools for flexible fine-tuning," the official said.

The PBOC also drained 200 billion yuan (US$29.3 billion) from the money market yesterday through 28-day bond repurchase agreements.

It was the central bank's largest mop-up via a repo of that maturity since 2003, when it started regular open market operations. This is in addition to mopping up 20 billion yuan via the sale of one-year bills yesterday.

Last week, the central bank mopped up 137 billion yuan from the market, the biggest weekly net drain since late October.

"The hike in the reserve requirement ratio and increasing open market operations by the central bank indicate the government is strengthening inflation management," said Dong Xian'an, chief economist with Industrial Securities.

"Inflation is the core factor for the central bank to decide whether to tighten monetary policy," said Dong, who raised his consumer price index (CPI) forecast for 2010 to at least a rise of 3.5 per cent from the original 3 per cent.

CITIC Securities and Shanghai-based Shenyin Wanguo Securities also increased their CPI forecast to 3.2 per cent this week from the earlier 2.6 per cent and 2.2 per cent.

"The deposit reserve hike is directly aimed at controlling bank lending, and it sends a very clear message to banks that the central bank is not happy about the lending spree," said Yi Xianrong, economist with the Chinese Academy of Social Sciences.

Commercial banks have lent nearly 600 billion yuan in the first week of 2010, the Economic Information Daily reported on Monday (January 11).

The surge in loans, nearly twice as much as the monthly average in the last half of 2009, also prompted the central bank to step up credit controls.

Chinese banks traditionally rush to book loans in January to boost their full-year interest earnings, and part of the haste now probably also stems from fears that officials will soon slam the door on lending.

"Bank loans have increased far too rapidly this year compared with late last year," said Li Jianfeng, economist with Shanghai Securities. "This has prompted the central bank to increase the reserve requirement ratio."

Earlier, a rise in the ratio was widely anticipated in the first quarter, with an interest rate increase tipped in the late second quarter or the third quarter.

"We expect the government to warn banks against excessive lending in the first quarter, and we estimate monthly new loans to be about 1 trillion yuan during the first quarter," said Wang Tao, head of UBS China Economic Research.

"As for the use of specific policy instruments, the most likely near-term policy change is for the PBOC to raise the reserve requirement ratio." Jun Ma, chief economist with Deutsche Bank China said.

During the first 11 months of last year, new loans reached 9.21 trillion yuan. Analysts expect the country's banks to lend around 7.5 trillion yuan this year, down from a record 9.5 trillion yuan in 2009.With reports from Agencies

 

[MM.Thaksin]

http://asia.news.yahoo.com/rtrs/20100113/tbs-china-economy-reserves-21231dd.html


RPT-UPDATE 2-China surprises with bank reserve hike, markets hit
Reuters
Reuters - Wednesday, January 13

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* China surprises by raising bank reserve requirements 50 bps

* Move was expected but not this early

* Increase is intended to tamp down on bank lending

* Fears of Chinese tightening rock global financial markets

* For graphic, click on: http://link.reuters.com/ceb23h

By Zhou Xin and Simon Rabinovitch

BEIJING, Jan 12 - China took its strongest step towards tightening monetary policy on Tuesday as the world's third-largest economy roars ahead, surprising investors with an increase in banks' required reserves that rocked global financial markets.

The move came just days after China reported robust trade figures and was the first time that the central bank had adjusted the ratio since a cut in December 2008, when it was loosening policy to cushion the economy from the global financial crisis.

The sudden move by the People's Bank of China to boost required reserves came earlier than investors had expected and appeared prompted by concerns that a renewed surge in bank lending was flooding the economy with too much cash, risking overheating and a surge in inflation.

"This is exactly what happens with Chinese policy. They say fine tuning. It never happens that way. It's always nothing or boom," Ken Peng, an analyst with Citigroup in Beijing said. "When they reach a consensus, it happens very quickly."

The PBOC said it will increase commercial lenders' reserve requirement ratios by 50 basis points as of Jan 18, making China one of the largest economies to start rolling back the emergency policies used to combat the crisis fallout.

"It caught the market by surprise," Lin Songli, an economist with Guosen Securities in Beijing, said. "The action is primarily targeted at curbing bank lending."

China helped pull the global economy out of recession last year, with its double-digit growth giving a lift to Asia and countries that have been able to feed its voracious appetite for commodities from iron ore to metals and crude oil.

Fears that Chinese tightening could take some of the fizz out of the global economic recovery shook financial markets, denting stocks, higher-yielding currencies and commodities. [ID:nLDE60B1B7]

Britain's top share index <.FTSE> shed 1.1 percent by midday as commodity issues and banks dropped sharply. Commodity-linked currencies, including the Australian, New Zealand and Canadian dollars, hit session lows against the U.S. dollar, following a sell-off in gold <XAU=>.

The PBOC announcement underlined the risk tied to those currencies which, along with commodities, rallied for much of 2009 on the view that the global economy was on a recovery path. "The U.S. dollar was given a lift by developments in China," said Camilla Sutton, a currency strategist at ScotiaCapital in Toronto. [MKTS/GLOB]

Chinese bonds and stocks were expected to take a hit when markets open on Wednesday. [ID:nTOE60B08S]

Analysts said the central bank, still cautious about hitting the brakes on the economy too hard, may be hoping that the boost in required reserves will give it some breathing room to wait before raising policy rates.

China is expected to nudge up interest rates midway through 2010, and a Reuters poll last week forecast minimal yuan appreciation over the year. [ID:nLDE6061YR]

MANAGING LIQUIDITY

A Chinese central bank official sought to downplay the significance of the bank reserve move, saying it was intended to manage liquidity and ensure stable bank lending.

"Our monetary policy stance is still reasonably accommodative and the move is aimed at using quantitative tools to fine-tune flexibly," the official, speaking on the condition of anonymity, told Reuters. [ID:nBJC002464]

China has long used required reserves for mopping up excess cash in the economy generated by its yawning trade surplus and speculative inflows. As such, it is an important weapon in its arsenal for curbing inflation, which analysts expect to climb to more than 3 percent this year after the country spent much of last year in deflation.

Shi Lei, an analyst at Bank of China in Beijing, said there could be two or three more required reserve increases before June.

"The reserve ratio hike is a strong signal the central bank is stepping up efforts to absorb excessive liquidity," Shi said. "The hike may drain about 200-300 billion yuan ($29-$43 billion) from the market but it really needs to drain about 700-800 billion yuan."

The RRR increase also followed two other tightening steps taken by the central bank on Tuesday.

The central bank raised the yield on its regular sale of one-year bills by about 8 basis points, the first increase in 20 auctions and higher than forecasts for a rise of 4 basis points.

It also drained a record 200 billion yuan via 28-day bond repurchase agreements, ensuring it will draw net funds from the market this week. [ID:nTOE60B020]

NOTHING, THEN BOOM

Chinese leaders from Premier Wen Jiabao to central bank governor Zhou Xiaochuan have insisted in recent weeks that the country is sticking to its "active fiscal and appropriately loose monetary policies".

Few, however, believed that Beijing would allow a repeat of last year's credit boom, when banks answered the government's call to open the floodgates to boost the economy and issued a record of nearly 10 trillion yuan in new loans.

The RRR increase followed reports that loans surged in the first week of the year to 600 billion yuan, nearly double the monthly average in the second half of last year and standing in sharp contrast to the government's repeated pronouncements that banks need to better control lending. [ID:nTOE60A021]

"We have forecast that the government will exit from stimulus policies earlier than scheduled. But this move came much earlier," said Zhu Jianfang, chief economist of Citic Securities in Beijing.

With China's exports growing again and investment inflows also on the rise, he noted that the country was again starting to accumulate more foreign exchange, only adding to the pool of cash sloshing about the economy.

"It's hard to tell whether this is the begining of more tightening steps. But one thing is sure. If forex reserves keep swelling, more will come," Zhu said. (Editing by Eric Burroughs & Kim Coghill; Additional reporting by Eadie Chen, Kevin Plumberg and Michael Wei)

 

[MM.Thaksin]

http://economictimes.indiatimes.com...ratio-to-cool-economy/articleshow/5438745.cms

China raises bank reserve ratio to cool economy
13 Jan 2010, 0207 hrs IST, REUTERS

Save Print EMail Share Comment Text:
BEIJING: China on Tuesday raised the proportion of deposits that banks must hold in reserve, in the clearest sign yet that it has started to
tighten monetary policy with its economy roaring back to the brink of overheating. The 0.5 percentage point increase in the reserve requirement ratio will take effect on January 18 and will apply to all banks apart from rural credit
cooperatives, the People’s Bank of China said on its website (www.pbc.gov.cn).

It was the first time that the central bank adjusted the ratio since it lowered the ratio in December 2008 as part of its loosening cycle at the time. Many in the market had thought that China might increase RRR before it lifted interest rates, but the move came far earlier than expected amid concerns that a renewed surge in bank lending was flooding the economy with too much cash.

Shi Lei, an analyst at Bank of China in Beijing, said there could two or three more RRR increases before June. “The reserve ratio hike is a strong signal the central

bank is stepping up efforts to absorb excessive liquidity,” Shi said. “The hike may drain about 200-300 billion yuan from the market but it really needs to drain about 700-800 billion yuan.”

The RRR increase also followed two other tightening steps taken by the central bank on Tuesday. The central bank raised the yield on its 20 billion yuan ($2.9 billion) in one-year bills by about 8 basis points (bps) to 1.8434% after holding it steady in the previous 20 auctions, compared with a median forecast among traders that it would go up by just 4 bps. It also drained a record 200 billion yuan via 28-day bond repurchase agreements, ensuring it will draw net funds from the market this week.

“This is exactly what happens with Chinese policy. They say fine tuning. It never happens that way. It’s always nothing or boom,” Ken Peng, an analyst with Citigroup in Beijing said. “When they reach a consensus, it happens very quickly,” he added.

The tightening steps come after reports that bank lending surged in the first week of the year to 600 billion yuan, adding to concerns fuelled by blockbuster trade data for December that the world’s third-largest economy is overheating.

 

[MM.Thaksin]

http://www.nbr.co.nz/article/chinas-bank-reserve-move-hits-nz-dollar-117124

China's bank reserve move hits NZ dollar
NZPA | Wednesday January 13 2010 - 09:12am

Commodity currencies including the New Zealand dollar fell after China said it would tighten banks' reserve requirements, raising concerns that Chinese demand could fall and slow global economic recovery.

China's central bank surprised global markets with a statement early today (NZT) that it would raise the reserve requirement ratio by a half-percentage point, effective next week, in the clearest sign yet of monetary policy tightening.

Commodity-linked currencies -- including the Australian, NZ and Canadian dollars -- all hit session lows against the United States dollar, following a sell-off in gold prices. The commodity currencies also tumbled against the Japanese yen.

After a volatile night, when it bounced around in a range between about US74.30c and US73.65c, the NZ dollar was buying US73.85c at 8am.

ANZ bank said the Chinese announcement that it was raising reserve requirements dominated action overnight.

Market reaction was as expected, with the Australian dollar under pressure along with commodities in general.

"But as the dust settles, attention will centre on a simple question: is this a sign of the bank getting ahead of the curve, and thereby good for risk, or negative and in line with the immediate knee-jerk reaction?"

Time would tell and the NZ and Australian dollars had appeared somewhat resilient to the news so far, ANZ said around 8am.

Against the yen the NZ dollar was in a sustained decline for most of the night, falling from around 68.40 yen about 8pm to a low shortly after 7am around 66.90, wiping out gains of the past week. By 8am the kiwi had staged a small recovery, lifting to 67.19 yen.

The NZ dollar also fell to 0.5096 euro at the local open from 0.5111 at 5pm, but rose against the aussie, reaching a week high, and by 8am was at A80.29c from A79.88c at the local close. The trade weighted index dropped to 66.74 at 8am from 66.96 at 5pm.

 

[MM.Thaksin]

http://hk.news.yahoo.com/event/fc/20100113/bucentralbank.html


人行突提早閂水喉 加準備金率0.5%
人行突提早閂水喉 加準備金率0.5%

中國人民銀行突然宣布，增加銀行存款準備金率0.5個百分點，凍結近3000億元資金。此舉震驚全球，歐股、黃金即時暴挫。分析指，中央提早出手，是反映當局對通脹及經濟過熱已有警惕，未來或將繼續出手調控...
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重點文章

* 人行突然提早閂水喉 加準備金率0.5百分點 震驚環球金融（明報）(05:10)
* 人行為何提早「出手」？（星島）(05:30)
* 內地出招 港股短線勢受壓（明報）(05:10)

人行突加存款準備金率0.5%
(星島) 1月13日 星期三 05:30

(星島日報報道)今年第一周信貸勁增六千億元（人民幣，下同）引起監管當局的高度警惕。央行昨晚隨即宣布，由一月十八日起上調金融機構人民幣存款準備金率零點五個百分點，至百分之十六。這是央行自○八年下半年金融 ...
人行為何提早「出手」？
(星島) 1月13日 星期三 05:30

(星島日報報道)對於人行昨日突然調升存款準備金率，法巴百富勤董事總經理兼首席經濟師陳興動直言：「沒想到人民銀行的動作這麼快，加準備金率的時間比市場預期更加提前，但這非完全意外，因為市場的資金實在太多， ...
內地出招 港股短線勢受壓
(明報) 1月13日 星期三 05:10

【明報專訊】受美鋁業績差及中資銀行股表現疲弱拖累，港股昨低開33點，在A股於下午3點收市後，恒指表現更明顯轉弱，由全日高位（22476點）跌至22326點收市，全日跌84點。人行於昨晚「提早」出招，突 ...
對整體內銀影響微
(明報) 1月13日 星期三 05:10

【明報專訊】在央行正式宣布調高存款準備金率前，1年期央行票據中標利率提高（見另文），預告收緊銀根，中資銀行股已率先全線遭拋售，跌幅介乎1％至3％。不過銀行業分析員表示，調高準備金率對整體銀行放貸能力， ...
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其他相關焦點新聞

* 央行昨回收2000億資金（明報）1月13日 星期三 05:10
* 人行突然提早閂水喉 加準備金率0.5百分點 震驚環球金融（明報）1月13日 星期三 05:10

 

[MM.Thaksin]

http://hk.news.yahoo.com/article/100112/4/g31x.html


人行突然提早閂水喉 加準備金率0.5百分點 震驚環球金融
(明報)2010年1月13日 星期三 05:10

【明報專訊】雖然內地官方曾多次重申，刺激經濟未有「退市」計劃，然而中國人民銀行昨日傍晚突然宣布，增加銀行存款準備金率0.5個百分點，凍結近 3000億元（人民幣．下同）資金。中央出手時機之早，大大出乎各界意料，有學者指這反映當局對通脹乃至經濟過熱苗頭已有警惕，未來或將繼續出手調控。而內地收緊銀根的動作，亦震驚全球，歐股、黃金昨日即時暴挫，分析員預計，港股今日或將低開。

內地在08年金融海嘯期間曾多次下調存款準備金率，而今次則是自08年6月以來，首次再度提高。存款準備金是銀行需提取一定比例的存款，存放於中央銀行，準備金率愈高，則意味銀行將被迫減少對外放貸的能力，故此調整準備金率一向被視為收放銀根的重要工具。

相當於凍結3000億資金

今次人民銀行上調大型銀行準備金率0.5個百分點至16％，小型銀行也調高0.5個百分點至14％，對應11月內地金融機構總存款接近60萬億元，即相當於銀行被一舉凍結了近3000億元不得外借。

內地經濟自去年第四季全面復蘇，出口以及工業增長又快速反彈，市場早已預期中央會開始調整以往實際極度寬鬆的貨幣政策，以免過猶不及反產生經濟過熱。不過，人行昨日出手仍相當出乎意料，主因是時機提前甚早。內地中信證券首席經濟學家諸建芳即指出，市場一般共識是最快在春節後，當局才會出招。

有市場人士即估計，人行提早行動，或因經濟情况超出預期，其中既有對通脹的擔心，亦有對銀行在今年首周又再重演信貸失控趨勢有關。雖然內地12月的經濟數據尚未公布，但經濟學界以及證券行已大幅上調對通脹的預測，預期12月的消費物價指數（CPI）或將達2％，較11月的0.6％大幅飈升，而在資金供應持續擴張下，今年通脹亦將有可能超出外界預期。故此當局有必要未雨綢繆，先行回收部分流動資金。

首周新貸增長或為宏調主因

不過，更直接的原因，可能是銀行在今年頭一周內即瘋狂放出逾5000億元新貸所致。內地興業銀行經濟學家魯政委就分析，這令當局可能產生對信貸以至通脹失控的擔憂，因此有必要發出強烈信號對市場預期進行引導。

雖然市場已預期今年或將是內地的調控年，但對於未來當局再將出何招仍未有共識，魯政委認為人行在年內將再提高準備金率2至3次，同時加息亦會提早實行。但國務院發展研究中心金融所研究員吳慶則稱，加息以及發行央票等傳統收緊銀根動作，對在固定匯率下的中國，效用實際不大，現時的舉措更多的是向外界表態「要收了」的信息。

（明報記者楊曦、羅羽庭報道）

 

[hahaho]

We dont see any rocks flying around.

The only rocking was the 7.0 earthquake in Haiti last nite.!

 

[matamafia]

China will not be the same as the previous Japs govt that had been an economic sucker for the USA for longest time. China knows how to flex it own political economic financial and military muscles.

 

[hahaho]

China will not be the same as the previous Japs govt that had been an economic sucker for the USA for longest time. China knows how to flex it own political economic financial and military muscles.

Venezuela, Cuba, N Korea and Iran etc.
They are all flexing their muscles for a long time.

 

[Devil Within]

Smart move. With this, China will not face the same banking problems like the US banks.

 

[PRC_ft]

Smart move. With this, China will not face the same banking problems like the US banks.

PRC Govt not as stupid as American Imperialists

 

[newyorker88]

Smart move. With this, China will not face the same banking problems like the US banks.

It may be too late, too little. The damage is already done and USA is not picking fast enough to absorb china over production.

 

[Watchman]

Well done China . Let some bite first but control the rest .