Experts comment on raising bank reserve requirement ratio

Now let's take a look at what analysts have to say about this latest move from the Central Bank.

A Senior Economist at the State Information Center says hiking reserve ratios could put a curb on excessive lending. Zhu Baoliang says the government does not want a repeat of the massive loans doled out in 2009. He thinks quantitative tools such as tweaking reserve ratios are relatively modest and can be used to check liquidity.

Meanwhile, another economist, but from the Chinese Academy of Social Sciences, says reserve ratios could go up even further if bank lending continues to soar. Yi Xianrong says he believes a rise of half a percentage point will have a bigger impact on smaller banks. But he also maintains that there's no fundamental change in monetary policy, with the Central bank likely to keep interest rates stable until the Consumer Price Index pushes above the level of say, 5 percent.

An analyst at the Bank of China, says the reserve ratio hike is a strong signal that the central bank is stepping up efforts to absorb excessive liquidity. Shi Lei believes this latest hike may drain about 200 to 300 billion yuan from the market. And also that it heralds more hikes, perhaps an additional 2 or 3 before June.

Chief economist at Citic Securities, Zhu Jianfang, says the hike came earlier than he expected. He thinks it's a signal that the government will bring forward exit from stimulus policies. Main reasons for this are recent heavy inflows of foreign exchange through both exports and capital accounts.