When asked whether the central bank would further raise the required reserve ratio in future, Yin said that would depend on how much trade surplus China would have. The economist predicted that China’s trade surplus in future would not increase at such a fast speed as now. Affected by the adjusted export trade refund policy, trade surplus growth rate in China declined sharply during the first half of this year. It will decline further during the second half of the year until next year. Meanwhile, the negative effects of the sub-prime housing crisis to US economy have not fully exposed yet. If the crisis badly affects American people’s wealth, it will also affect their consumption. By then, Chinese export to US will also be affected as well, said Yin.

However, Qin Hongyu, an economist at BNP Paribas Equities Limited, predicted that China would raise the required reserve ratio for another time by the end of this year.

Raising required reserve ratio is one of the three major measures often used by the central bank. In applying this measure, the central bank will require that commercial banks should keep a certain proportion of the deposited money in order to control excessive liquidity. When companies are eager to borrow loans from banks, raising required reserve ratio can prevent banks from releasing too many loans to companies.