In its battle against inflation China ordered the biggest lenders for the third time in five weeks to increase the reserve requirements by 50 basis points, ahead of the inflation report scheduled for tomorrow , where the CPI is expected to rise to the highest since July 2008.
A confirmation of higher inflation could determine the People's Bank of China to increase rates this week, which would be a more powerful weapon against inflation. What triggered today's action was the release of Novembers trade balance surplus which rose more than analysts expected.
The reserve ratio for the biggest banks reached to 18.5%. Yet this action is not seen as threatening to the Chinese economic growth unless its accompanied by a much more sever tightening like an increase in the interest rates. Thereby fears over a slowing global economic recovery were not triggered yet.