The People's Bank of China (PBC), the central bank, is expected to raise the required reserve ratio of foreign-currency deposits from 4 percent to 5 percent as of May 15, the China Securities Journal quoted sources as saying on Wednesday.

March figures showed that Chinese financial institutions held US$165 billion in foreign currency deposits at the end of the month. This new rise will force banks to accumulate a further US$1.65 billion by May.

The PBOC's press office declined to comment on the announcement as experts put forward that such a move would target a decrease in financial liquidity in foreign currencies.

With more control measures overseeing renminbi loans, companies have turned to foreign currency loans to compensate. The latter nationwide totaled over US$171 billion by the end of March, a 11.24 percent rise year-on-year. New loans taken out during the month itself amounted to US$2.7 billion, up 800 million from February.

To rein in excessive liquidity and cool the booming economy, the PBC announced on April 29 that the renminbi reserve ratio would be raised by 0.5 percent from May 15 – the seventh consecutive rise in 2007. A rise in the ratio for foreign currency would also help ease appreciation of the Renminbi which registered its best-ever rate against the dollar on Tuesday, standing at 7.6951 yuan.

(Xinhua News Agency May 10, 2007)