Friday, March 18, 2011

China Raises Reserve Ratio for Banks, Again

The People's Bank of China, China's central bank, has announced that it is  raising the reserve requirement ratio for Chinese banks by half a percentage point. It is the third increase this year by PBOC and continues the central banks schizophrenic monetary policy.

On the one hand they take these steps that will slow money growth, yet continue to print new yuan to prop up the dollar in foreign exchange markets. The printing of new yuan has resulted in increasing price inflation in China that many believe is now over 10%.

1 comment:

  1. To me this sounds almost like austrian method. At this rate China seems to be getting rid of fractional reserve banking. By printing money (and raising reserve ratio) they are replacing fake fiat money with real fiat money. And that's a good thing.