Yesterday evening, China’s central bank hiked deposit reserve requirement another 50 basis points (1 basis point=0.01%) to 12.5 percent, the seventh such maneuver this year, and ten dating back to June 2006. “Deposit reserve” is a balance all retail banking institutions must maintain at the nation’s central bank, often expressed as a percentage of its total deposit. A higher reserve requirement means banks have less funds for lending or other investment projects. This latest move is a part of Beijing’s continuing effort to rein in excess liquidity (and the attending inflation) and slow down what appears to be an overheating economy. The People’s Bank of China has also raised interest rates four times this year for a total of 108 basis points. Currently, a one year savings account will net you somewhere around 3.6 percent. So far, China has favored a gradual approach in tightening its monetary policy, with frequent but modest tinkering along the way. But with inflation still soaring at 4 percent (or more, have you been to Carrefour lately), one has to wonder if the PBoC dropped the ball somewhere. Was there ever a time (or perhaps even now), a more drastic measure would have been more appropriate? There doesn’t appear to be any sense of urgency in fighting inflation coming out of the PBoC and a general lack of concern/appreciation for risk in China, very troubling indeed.
On a lighter note, World of Warcraft’s expansion pack, The Burning Crusade finally went live in China, six months after its American/European release. The9, the local operator of the WoW franchise saw a nice 5 percent pop in its stock. In related news, less than 24 hours (23.5 to be exact) after TBC server went live, a player named 银龙 or “silver dragon” has already reached level 70. The previous record was 28 hours, set by a French player, shortly after the European launch, once again proving our theory that Chinese online gamers are just nutz, and the French aren’t too far behind.
Jay Sheng is Shanghaiist’s Business Editor. Email tips, news and gossip about business in Shanghai and China to biz AT shanghaiist DOT com.