People's Bank of China Raises Reserve Requirements 50bps to 21%

The People's Bank of China raised the required reserve ratio by 50 basis points, bringing the average rate to 21% for large banks (and 19% for smaller banks), effective 18 May 2011.  Earlier in the week Chinese Vice Premier Wang Qishan said "The most pressing problem we are facing right now is the problem of inflation,".  China reported inflation of 5.3% in April, compared to 5.4% in March this year, and above the government's target of 4%.  The move is expected to drain around 370 billion Yuan from the banking system.  The People's Bank of China last raised the required reserve ratio 50bps on the 17th of April, and raised the benchmark interest rate 25bps on the 5th of April this year.

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