China will raise the reserve requirements on domestic and foreign banks and other deposit-taking financial institutions next month in order to reduce the country's money supply and cool off an over-heated economy.
The People's Bank of China, the country's central bank, said on Saturday that it will raise reserve requirements for banks on China's mainland from 6 per cent to 7 per cent, starting on 21 September
Reserve requirements set the percentage of deposits that banks must hold in reserve, either in their own vaults or at the central bank. The money can be held in cash or government treasury bills.
State-owned commercial banks, national joint-stock commercial lenders, city and suburban commercial banks, the Agricultural Development Bank of China, trust firms, finance companies and foreign-funded financial institutions are required to obey the rule.
The new rule won't, however, affect rural and urban credit cooperatives.
