China cuts reserve ratio in bid to counter slowdown
CHINA’S central bank has cut the amount of cash banks must hold in reserves, boosting lending capacity by an estimated 350-400bn yuan (£35-£45bn) in a bid to crank up credit creation as the world’s second-biggest economy faces a fifth successive quarter of slowing growth.
The People’s Bank of China (PBOC) is on the course of gentle policy easing to cushion the world’s fastest-growing major economy against stiff global headwinds as Europe’s debt crisis grinds on, although it has been treading warily.
The cut is set to boost the confidence of domestic stock investors, who have been eagerly awaiting clear signs of an easing of monetary policy.
‘It’s a very positive move for the stock market, and it will create a bullish stock market,” Li Daxiao, the research head of Shenzhen-based Yingda Securities, said in an online note.
The PBOC cut big banks’ reserve requirement ratio (RRR) by 50 basis points to 20.5 per cent, effective from next Friday, after repeatedly defying market expectations for such a move after it first cut the ratio last November.