The latest of attempts in keeping the world’s fourth-largest economy from overheating, was today when China’s central bank raised the level of deposit that lenders must hold in reserve (the bank reserve requirement) for the 9th time in thirteen months.
Again this is not a surprising move, as the policy makers have been continuously tightening policy measures to constrain the economy. Today’s step follows an increase in interest rates on July 20, and a reduction in the tax on interest income from bank deposits – an attempt to lower the incentive of individuals looking to bet on the country’s blazing-hot stock markets.
China has already raised this reserve requirement 6 times this year. The country’s central bank has also raised interest rates three times this year so far. We can most likely expect further action; higher reserves, and higher interest rates.
I warn you all once again, this is the time to step out. The bomb’s ticking is getting louder as China’s economy further heats. For those of you who survived the dot-bomb, don’t be too optimistic – you lucked out. But the chances of lucking out with China’s economy blowing, are very slim – no matter which part of the world you are in.
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