SHANGHAI, April 7: China's third increase in bank reserve requirements so far this year will have little impact on the lending business of Bank of China as market liquidity remains ample, a senior executive said on Saturday.

The increase, announced by the central bank as part of Beijing's effort to slow economic growth, will take the reserve requirement to 10.5 per cent for big banks and to 11.0 per cent for smaller lenders from April 16.

“From a macroeconomic perspective, the reserve hike is a good thing for China,” said Zhu Min, group executive vice president of Bank of China, the country's second largest lender.

“In January and February, loan growth in the banking system was still too fast,” he said on the sidelines of a financial meeting in Shanghai, China's financial hub.

Zhu expects that the central bank can soak up about 180 billion yuan ($23.32 billion) from the banking system, which could otherwise have been lent to firms and households, through the increase of the bank reserve requirement, he told Reuters.

Money and credit growth rose sharply in January and February, reviving fears of an acceleration in investment in fixed assets, such as factories and flats that would undermine a year-long central government drive to curb wasteful capital spending.

“In such a situation, I think reserve hikes are good for the stable growth of China's macroeconomy,” Zhu said.

China's economy expanded by 10.7 per cent in 2006, its fourth consecutive year of double-digit growth.

“From a banking perspective, currently market liquidity is very good, so I don't think the reserve hike will have any big impact on our business development and profit making,” he said.—Reuters