China’s central bank has ordered new limits on lending to consumers and businesses by requiring commercial banks to maintain larger percentages of deposits at the central bank. This will be the second time in a little over a month.
Announced Friday, after market closing in China, the move aims to slow expansion in the Chinese economy via monitoring expansion in loans. Borrowing has sky rocketed and individuals and business have been seeing climbing costs in the nation.
In the hours following the announcement international stock index futures in the United States fell by 1 percent as did oil and copper. The new limits are expected to put a dent in the international recovery.
China’s concern though lies with limiting their inflation though more than it does with potential impact it’s decision may have on other economies. Thursday, the Chinese National Bureau of Statistics said annual inflation in producer prices, doubled in the month January to 4.3 percent.
The tightening of credit will not demand that banks to restrict lending instantaneously, as many of them have already been maintaining roughly 18 percent of assets, more than the requirement. The banks though still have a challenge ahead of theme. More money was lent in January than in the preceding three months combined.
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