China raises bank reserve ratio to 10.5%

People’s Bank of China has increased deposit reserve ratio by 0.5 percentage point to 10.5% starting April 16. Banks will now need to set aside more money as reserves for the sixth time in less than a year to slow inflation and investment in the fastest-growing economy.

A 0.5 percentage point increase takes out about 170 billion yuan ($22 billion) from the financial system, reducing the funds banks have available to lend.

Record trade surplus is stoking excess investment in an economy that expanded 10.7% last year, the fastest in more than a decade.

China’s economy may grow as much as 11% in the first quarter, the State Information Center said in a report last month.

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