China Aggressively Removing Bank Liquidity in Inflation Fight

The banks will need to raise capital, but by how much is unclear. The are being forced to include $700 billion of margin deposits, of guarantee and letters of credit in their required reserves calculation. The move will remove ~$125 billion in liquidity by one estimate.

Exclusive: China plans to mop up bank liquidity

Some banks have received the order notice from the People's Bank of China, which requires them to pay deposits to the central bank in batches, the sources said.

Capital Economics said in a research note that it had previously expected two 50 basis point RRR hikes later this year in order to sterilize the central bank's foreign currency interventions.