BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/06
The last time the reserve requirement ratio was lowered was in spring 2012. Because monetary policy in China is not yet implemented through interest-rate policy as in the developed world, the ratio is still considered a key instrument of monetary policy. China’s central bank has kept the reserve requirement ratio relatively high by world standards on concerns that easing monetary policy could e.g. result in overheating of stock markets or add to China’s debt problems. Another reason for large reserve requirements is China’s lack of a comprehensive deposit insurance scheme. The PBoC is currently drafting guidelines for the rollout of a new deposit insurance scheme, however.