The People's Bank of China in Beijing, which is raising the reserve requirement ratio for commercial banks by 50 basis points to 19 percent, a historic high.

The People's Bank of China announced Monday it will suspend selling central bank bills in its regular open market operations this week, a move seen to ease banks' cash pressure after the reserve requirement hike last Friday.

On Jan. 14, China's central bank raised the reserve requirement ratio for the fourth time in two months in an effort to drain excessive liquidity from the banking sector. The 50-basis-point hike, effective starting Thursday, is expected to freeze about 350 billion yuan, and domestic commercial banks may face a temporary capital crunch.

"Most of us think the central bank wants to ease capital pressure because it has just hiked RRR and the effective date is pretty close," said Yang Peng, a Chinalion Securities bond analyst. Also, with the Chinese New Year drawing near, the central bank may want to leave the market with a little more liquidity, Yang said.

The central bank usually sells one-year bills on Tuesdays and three-month paper on Thursdays via open market operations.

China's business press carried the story above on Tuesday. China.org.cn has not checked the stories and does not vouch for their accuracy.

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