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Last Updated: Monday, 30 April 2007, 06:49 GMT 07:49 UK
Chinese rate rise now less likely
Yuan
Analysts say a rate rise in the near future is now unlikely
The People's Bank of China has increased its reserve requirements for banks for the fourth time this year in an effort to rein in economic growth.

Increasing reserve requirements is seen as an alternative to raising interest rates for the fourth time in a year.

It has increased the amount of their deposits that banks must keep in reserve from 10.5% to 11%.

With core inflation below 2% the central bank is keen to reduce credit without hitting the economy too hard.

The tightening will come into effect on 15 May.

There had been speculation that the People's Bank of China would raise rates again before the start of a week-long public holiday on 1 May, but that is now considered unlikely.

"With the announcement of the deposit reserve ratio increase, it's safe to say that there won't be any benchmark interest rate increase in the near future," said Zhu Jianfang, chief economist at China Securities in Beijing.

Despite a surprisingly small figure in March, China is still running a huge trade surplus and the central bank is concerned about the amount of liquidity in the economy.

The amount of spare cash has been one of the drivers behind the booming stock market, which has risen 40% so far this year.




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