China Reserves

Local press reports have emphasized the Chinese sliding reserve requirement. The explosion of new bank lending (reports suggest CNY1.45 trillion or ~$212 bln) in the first three weeks of the year appears to have slowed considerably under the administrative measures. There is some speculation that Chinese officials seek to tighten their control by providing monthly quotas instead of the current practice of quarterly quotas. The PBOC left the 1-year bill rate steady today allowing a small increase over the past two weeks. Concern about the impact of China's course has weighed on the equity markets. China's Shanghai Index is off more than 10% from its Nov peak, most of which has been lost since Jan 19th. Hong Kong's Hang Seng is off 13.5% since its Nov peak and 11.8% since Jan 11th. Taiwan's Taiex Index was lifted to new cyclical highs at the start of the year but since the Jan 19th peak, it has lost 9.7%. Through today, the Taiex fell for the 7the consecutive session, the longest such streak in 4 1/2 years.