China Tightening Deposit Minimums

In order to fight against rising consumer prices and house prices, the Chinese central bank is likely to tighten monetary supply.

After November 15, Several commercial banks have will have to increase their minimum deposits at the central bank by 0.5 percentage according to various sources. This money will be pulled out of economic activity. On the stock market, the prices of big financial companies like the Bank of China fell by more than three percent.

“The economy is growing a bit too fast, so the country risks rising inflation,” said the chief economist at Industrial Securities, Dong Xian. “The authorities will therefore use monetary policy to bring down inflation expectations significantly.” The government is also concerned that the loose monetary policy of the US Central Bank will attract fresh capital to China, which will further drive asset prices up. The Fed wants to boost the U.S. economy by pumping 600 billion U.S. dollars of fresh money into circulation.

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