The Central Bank Of China Raised The Deposit Reserve Rate For The Fifth Time In A Year.

The Central Bank of China announced on Thursday that it would increase deposit banking institutions starting in May 18th.

This year, the Central Bank of China has raised its deposit reserves every month.

Lu Ting, economist at Bank of America-Merrill Lynch, said that the move was intended to prove to the public that they are taking measures to deal with inflation, and that the reserve ratio has little impact on the economy, because the actual monthly loan amount of the bank is controlled by the central bank.

Capital Economics's Mark Williams said the central bank raised the deposit reserve rate on Thursday night somewhat unexpectedly, because the central bank is very inclined to announce policy decisions during the festival or weekend.

The central bank last announced the increase in the reserve ratio on Sunday.

Official data released on Tuesday showed that China's consumer price index (CPI) increased 5.3% in April, up slightly from 5.4% in March, but still far above the government's annual target of around 4%.

Tuesday's data also showed that the new RMB loans exceeded expectations in April, and the trade surplus surged from $139 million in March to $11 billion 400 million in that month, which means more capital flows into the Chinese economy.

After the deposit reserve ratio is raised, financial institutions must deposit a larger proportion of deposits in the central bank.

The official reserve requirement ratio of most large financial institutions will increase to 21%.

According to the deposit level in March, the Dow Jones Newswires will raise the deposit reserve rate from the financial system to about 57 billion yuan (US $8 billion 770 million).

This year, the central bank has raised the deposit reserve rate every month, but Williams said the central bank's frequency could slow down to around two every month, as recent data show slowing economic growth.

China's industrial added value increased by 13.4% in April, up from 14.8% in March, which made some observers worried about the risk of slowing economic growth in China.

Williams said that as long as inflation does not rise sharply, the attention to economic growth will prevail.

The Central Bank of China raised the deposit reserve rate for the six time last year, raising the benchmark deposit and lending rate for the four time since October last year.

The last raised deposit rate came into effect in April 21st, and the latest interest rate increase came into effect in April 6th.