China Raises Key Banking Benchmark

In a move aimed at cooling China's rapidly expanding lending and capital markets growth, China's central bank Saturday said it would raise the reserve ratio requirement for banks by half a percentage point, to 13.5%.

The hike in the reserve ratio requirement, which is the amount of capital domestic banks are required to hold against liabilities, will take effect Nov. 26, said the People’s Bank of China. It's the ninth time Beijing has lifted the key benchmark this year.

"It’s not really a surprise," says Zuo Xiaolei, chief economist of Galaxy Securities in Beijing. "China has an excessive liquidity problem because there is a big imbalance in the money supply."

The last hike in the ratio took effect Oct. 25. On the same day, Beijing announced that GDP growth eased, and markets' saw their largest one-day fall in a three-month period, when the Shanghai Composite Index dropped 4.8%. ...