In an attempt to avoid an asset bubble formation and keep inflation under control, the Chinese central bank decided to force banks to raise their deposits starting January 18 by 0.5%, this increase in the reserve ratio is the first such decision since June 2008 and took everyone by surprise since it was expected to be imposed only in April.
This decision follows the record 1.3 trillion dollars loans obtained in the first 11 months of 2009, increasing the government concerns of a bubble formation in the real estate market and stocks market. Thereby the reserve ratio for bigger banks is now 16.0%.
Also in the attempt of the central bank to tighten its monetary policy, the interest rate on the one-year bill was increased by 0.8% to 1.84 percent. Meanwhile the government continues its support to the agriculture sector, thereby agricultural credit cooperatives and other rural financial institutions were excluded.