Raised reserve requirement by China Central Bank 央行調高存款後備金比例

On 16 June,2006, the People's Bank of China announced that by 5th July 2006, all the deposit-taking financial institutions in China are reuired to raise the reserve requirement level by 0.5 percentage points. In other words, financial institutions like Commerical Bank of China and other state commerical banks, have to change their reserve requirement level from now 7.5% to 8%.
Except rural credit cooperatives(including rural cooperative bank), all other credit cooperatives are also being affected.
WHAT are the impacts of it? Is this policy good or not?
A great increase in GDP growth is not bad, but a stable increase is much more important and healthy to China. In the writer's view,it's a good policy.As this policy indirectly reduces the credit rate, the applicaion for investmant loan is expected to be more difficult. And thus, not only can it give a support to the state macro control, but also help relaxing the overheated investment expecially the property market in China in these two years. Watching small bubbles in property market developed in some cities like Shanghai recently, it is very reasonable Central Bank to take this action immediately.
What's more, this policy is only the first step taken by the State. To ensure a more effective macro control and soft-landing of the whole economy, the writer think the central bank would raise interest rate by 0.25 to 0.5 percentage points in her next step following this one.