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Ratio raised to 12.5%

The People’s Bank of China yesterday raised the amount that commercial banks must hold in reserve by 0.5 of a percentage point, for the seventh time this year.

The adjustment will take effect from September 25.

“The move aims to strengthen liquidity management in the banking system and curb fast growing loans,” the central bank said on its website.

The increase took the ratio to 12.5 percent for commercial banks.

“The move was foreseeable given the latest macroeconomic figures,” said Li Zhikun, senior analyst with China Jianyin Investment Securities Co Ltd.

“I expect the central bank to increase the reserve requirement ratio again by the end of the year.”

China’s consumer price index (CPI) hit 5.6 percent in July, pushing the January-July figure to 3.5 percent - well above the full-year target set by the central bank. Analysts predicted the CPI could rise above 6 percent in August.

The central bank raised interest rates for the fourth time this year on August 21. The benchmark one-year deposit rate is now 3.6 percent, while the one-year lending rate is 7.02 percent.

Analysts believe the adjustment will have a limited impact on the stock market. China’s major stock index surged 1.56 percent yesterday to reach 5393.66 points.