China Raises Bank Reserve Minimums Over Inflation Concerns

The People’s Bank of China has increased bank reserves minimums by 0.5 percent or 50 basis points. The current reserve requirement is 16 percent of assets for large banks, and 14 percent for smaller institutions.

The Bank has implemented the increase to address record lending levels that officials fear are fueling asset bubbles – particularly property values. The Bank is also dealing with the impact of the 4 trillion yuan stimulus package the government implemented last year to boost the economy.

“There’s a monumental property bubble and fixed-asset investment bubble that China has underway right now,” hedge fund manager James Chanos, founder of New York-based Kynikos Associates Ltd., said in a Jan. 25 Bloomberg Television interview. “Deflating that gently will be difficult at best.”

Source: Bloomberg

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