Instant view: China raises bank reserve requirements

The move, following an interest rate rise earlier this month, is Beijing's latest step to mop up excess cash to curb inflation.

COMMENTARY:

LU ZHENGWEI, ECONOMIST AT INDUSTRIAL BANK IN SINGHAI:

"It's likely that the central bank will raise RRR each quarter. So we expect another rise in March.

"Currently, China's economic growth is strong and inflation pressures are big. It's necessary to continue to manage liquidity.

"I believe a price must be paid to bring down inflation. Some industries may suffer as a result of the tightening but it won't hurt the broad economy."

DAVID COHEN, ECONOMIST AT ACTION ECONOMICS IN SINGAPORE:

"It's not a surprise and won't be the last one. The RRR rises are likely to continue in the face of the building inflation pressures.

"The RRR rise is just one of their tools to contain inflation pressures -- they also raising interest rates and tolerating the gradual appreciation of the exchange rate."

ADAM COLE, HEAD OF CURRENCY STRATEGY, RBC

"The Aussie has fallen as it often does when people worry about tighter Chinese policy slowing growth ... When the market digests the news it will be a fight between whether tighter policy is bad for growth going forward or a reflection of strong growth now. It generally becomes more ambiguous for the Aussie than the knee jerk reaction suggests.

"We think there is more to come in terms of reserve requirements and higher rates and a more rapid appreciation of the currency than the market is discounting.

"The more tightening there is the more there will be a material impact on the Aussie, so within the commodity currency bloc, it will be relative negative for the Aussie. The other impact which is less widely considered is that it will be positive for the yen."

DONGMING XIE, ECONOMIST AT OCBC BANK IN SINGAPORE:

"I think the RRR hike is within expectation as there are large amount of central bank bills maturing in the coming weeks. Despite Jan CPI is lower than expected, the RRR also proved that central bank's tightening path remains intact."

JIANG LI, BANKING ANALYST WITH CCB INTERNATIONAL IN BEIJING:

"The move will have some impact on bank lending. We expect new local-currency loans to be about 500-600 billion yuan in February."

BA SHUSONG, CHIEF ECONOMIST AT HUACHUANG SECURITIES IN BEIJING:

"The increases in RRR is a normal operation by the central bank to mop up liquidity.

"The direct reason is that a large amount of central bank bills are due to mature and the rising money market interest rates push up the cost for issuing more bills.

"In addition, the amount of money used to absorb foreign exchange inflows are also rising at a faster pace recently."

ZHU SONG, SENIOR TRADER AT BANK OF COMMUNICATIONS IN BEIJING:

"The market has been expecting it for several weeks.

"The central bank has been a net liquidity injector these days, making it necessary to raise required reserve ratio.

"China has been moving pretty swiftly in monetary tightening this year."

WANG HU, ECONOMIST AT GUOTAI JUNAN SECURITIES IN SHANGHAI:

"Large amount of central bank bills are maturing, so the central bank has to raise banks' reserve requirements to mop up liquidity.

"It's possible for the central bank to raise RRR further but the room has become limited. We also expect one more interest rate rise within this year.

(Reporting by Kevin Yao, Aileen Wang and Langi Chiang)