Posted by: mulrickillion | December 1, 2011

Reserve ratio for banks decreased

By Wang Xiaotan and Gao Changxin, China Daily, 2011-12-01 —

Liquidity shortage cited as reason for sudden drop

BEIJING / SHANGHAI – China’s central bank lowered reserve requirements for commercial lenders for the first time since December 2008, a sign the country has started to ease its monetary stance as white-hot inflation is contained and economic uncertainties increase.

The central bank will reduce the ratio of money that banks have to set aside on deposit by 50 basis points among commercial lenders, effective on Dec 5, said the People’s Bank of China in a statement on Wednesday.

After the move, the reserve ratio for major banks will be 21 percent, while the ratio for small and medium-sized lenders will stand at 17.5 percent. Analysts expect the cut in the ratio will inject 350 to 400 billion yuan ($55 to $63 billion) into the market.

"The cut falls within expectations. The current liquidity in the Chinese banking system has become too tight and the liquidity shortage forced the central bank to inject money into the market," said Ma Jun, chief economist at Deutsche Bank Greater China.

China has increased the reserve ratio 12 times since 2010 to soak up liquidity and curb inflation, including six times in the first half of this year. . . .

Reserve ratio for banks decreased|Markets|chinadaily.com.cn

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