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China Money Rate Jumps as New Reserve Requirement Takes Effect

China’s money-market rate jumped the most in six weeks on speculation cash supply will wane as lenders comply with a central bank ruling on reserve requirements.

Six banks, including the nation’s five biggest lenders, will set aside more cash from today after policy makers broadened the scope of reserve requirements to include customers’ margin deposits, according to Liu Junyu, an analyst at China Merchants Bank Co. Other financial institutions will boost their reserves on Sept. 15, he said.

“The bigger banks may be required to park about 68.8 billion yuan ($10.8 billion) with the central bank this month,” Shenzhen-based Liu said. “Such a big outflow will surely have an impact on liquidity in the financial market. The central bank may pump in money to ease the shortage.”

The seven-day repurchase rate, which measures interbank funding availability, rose 68 basis points to 4.89 percent as of the 4:30 p.m. close in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. That was the biggest increase since July 20.

Fourteen publicly traded Chinese banks will increase the reserves placed at the central bank by a combined 695.8 billion yuan over the next six months, the China Securities Journal reported today, citing its own estimates based on lenders’ interim earnings reports.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, dropped one basis point, or 0.01 percentage point, to 4.32 percent, according to data compiled by Bloomberg.

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