Will the latest increase in China’s reserve requirement ratio put a brake on property prices? Don’t count on it. In a perverse way, every increase in the RRR is an incentive to load up on real estate.

To understand why, take a few steps back. In the past, the People’s Bank soaked up liquidity caused by currency intervention by issuing sterilisation bills. From 2008 onwards, though, as the yield the bank paid on these liabilities started to rise above what it was earning on its assets – mostly US Treasuries – this became an expensive business. So the PBoC started locking up more bank deposits through the RRR: Friday’s increase, to 19 per cent, was the seventh since January last year. On its own terms, this has been a successful strategy. As Commerzbank notes, liquidity created through foreign exchange intervention since 2004 has tracked closely the liquidity absorbed via bill issuance and RRR rises.

But consider the implications for potential homebuyers. If bank credit growth is managed primarily through quotas, rather than the price of money, then every increase in the RRR amounts to an assurance that interest rates will not rise materially. In other words, yes, you can afford that second or third mortgage.