CHINA won’t cut its reserve requirement ratio for banks as long as the country still sees relatively strong capital inflows, China Business News reported yesterday, citing former central bank vice governor Wu Xiaoling.

    The amount of liquidity released following a cut in banks’ reserves placed with the central bank would have a big impact on the market, Wu told reporters at a weekend economic forum, the paper said. Major banks have to place 20 percent of their deposits with the central bank.

    Economists have said the People’s Bank of China should cut the reserve requirement ratio to boost economic growth as banks can lend out the funds and boost economic activity.

    The central bank has for years been buying up foreign exchange in the economy to offset the impact from capital inflows. This has become the central bank’s main way of controlling the amount of currency circulating in the system.

    China’s central bank and financial institutions bought a net 189.20 billion yuan (US$30.4 billion) of foreign currency in March, compared with a net purchase of 128.25 billion yuan in February, according to calculations based on central bank data issued last month. (SD-Agencies)