The Chinese government moved again on Monday to battle inflation, but instead of an outright increase in the required reserve ratio (RRR), this time it clarified policy on margin deposits.
The action will require commercial lenders to set aside reserves to cover 21.5% of their margin deposits—funds provided by the banks’ clients to gain such business necessities as letters of credit and guarantee as well as issuance of bankers’ acceptance.
Bloomberg reported that the People’s Bank of China (PBOC) sought to further tighten monetary policy with the action. Bank of America Merrill Lynch economist Lu Ting was quoted saying that the move could pull as much as 900 billion yuan ($140 billion) from funding available for loans. Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia, had said in the report that while some banks already set aside such reserves, the requirement for them to do so had not been clearly stated.