China raises banks' reserve requirements

In a move to tighten the country’s monetary policy, China’s central bank has raised reserve requirem

The reserve requirements will raise by 0.5 per cent points to 15 per cent, effective from January 18. The rise in the amount of deposits that banks are mandated to keep on reserve is seen as an attempt by the People's Bank of China to cool down the economy and control the looming inflation by slowing down spending.

Analysts have taken the increase in reserve requirements as an indication that China may be heading towards a rise in the country's benchmark interest rates.

In December 2008, China had lowered the reserve requirement to loosen the monetary policy.

The tightening Chinese monetary policy and liquidity curbs triggered a drop in crude oil prices. Asian stocks are also expected to fall on Wednesday due to apprehensions of a lower demand of raw materials and commodities from China.