SteelOrbis Shanghai
On April 5, the People's Bank of China (central bank) announced a rise of half a percentage point in its RMB deposit reserve rate for deposit-taking financial institutions, effective as of April 16, 2007.
Since the beginning of the current year, the Chinese central bank has raised the deposit reserve rate three times, with this latest increase following the upward adjustments of half a percentage point on January 15 and February 25. The deposit reserve rate will reach 10.5 percent after the latest rise. The three successive reserve rate adjustments are expected to freeze up a total of RMB 500 billion ($64.8 billion).
Nevertheless, due to China's substantial trade surplus and the huge inflow of hot money from abroad, the numerous Chinese central bank measures have failed to achieve any fundamental improvement in China's over-liquidity situation. Some market insiders deem it likely that the central bank will continue to implement measures such as hiking the deposit reserve rate and interest rate.