Central bank cuts reserve ratio
By Feng Jianmin |
February 19, 2012, Sunday
|
Print Edition
Print Edition
China will allow commercial banks to have more money for lending from February 24, as the country proceeds with a mild easing in monetary policies to ensure liquidity and economic growth amid a grim global outlook.
The People's Bank of China yesterday announced it will lower the reserve requirement ratio for banks by 0.5 percentage points, the second cut in three months, after data showed shrinking social financing and weaker trade in January.
The change in the ratio is expected to add about 410 billion yuan (US$65.1 billion) to the banking system. The reserve requirement ratio will be 20.5 percent for large banks and 17 percent for smaller ones.
China raised reserve requirements six times and interest rates three times last year to tame inflation, which has led to the country's slowest economic growth since 2009. The gross domestic product growth rate dropped to a 10-quarter low of 8.9 percent in the fourth quarter last year, according to the National Bureau of Statistics.
"Industrial activities are likely to resume and the demand for credit, investment, and money supply are likely to pick up after the long holidays in January," said Zuo Xiaolei, a chief economist with Galaxy Securities. "It is proper to add a certain amount of liquidity to ensure sufficient financial support for affordable housing projects and small and medium enterprises."
The central bank has defied market expectations for such a move since the middle of last month, and Zuo noted the cut does not necessarily mean monetary policy will change from prudent to loose.
The People's Bank of China yesterday announced it will lower the reserve requirement ratio for banks by 0.5 percentage points, the second cut in three months, after data showed shrinking social financing and weaker trade in January.
The change in the ratio is expected to add about 410 billion yuan (US$65.1 billion) to the banking system. The reserve requirement ratio will be 20.5 percent for large banks and 17 percent for smaller ones.
China raised reserve requirements six times and interest rates three times last year to tame inflation, which has led to the country's slowest economic growth since 2009. The gross domestic product growth rate dropped to a 10-quarter low of 8.9 percent in the fourth quarter last year, according to the National Bureau of Statistics.
"Industrial activities are likely to resume and the demand for credit, investment, and money supply are likely to pick up after the long holidays in January," said Zuo Xiaolei, a chief economist with Galaxy Securities. "It is proper to add a certain amount of liquidity to ensure sufficient financial support for affordable housing projects and small and medium enterprises."
The central bank has defied market expectations for such a move since the middle of last month, and Zuo noted the cut does not necessarily mean monetary policy will change from prudent to loose.
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