Posted by: mulrickillion | February 19, 2012

China cuts RRR to ease credit crunch

Xinhua, Feb 18, 2012 —

BEIJING – China’s central bank on Saturday announced to lower banks’ reserve requirement ratio (RRR), underling its efforts to ease short-term credit crunch and secure growth in the wake of a lacklustre external market.

The cut, the second of its kind in three months, will drop the RRR by 50 basis points to 20.5 percent for large commercial banks and 17 percent for mid- and small-sized banks, the People’s Bank of China (PBOC) said in a statement on its website.

The move will become effective on February 24 and release an estimated 400 billion yuan (63.54 billion US dollars) in capital into the market.

The PBOC in December cut the RRR by 50 basis points for the first time since December 2008, after hiking the RRR six times last year in an effort to check inflation.

"It shows that the focus of country’s policy is directing from containing prices to stabilizing growth, which is also in line with the government’s intent to fine-tune macroeconomic policy in the first quarter," said Li Daxiao, director of the Yingda Securities Research Institute.

Premier Wen Jiabao said last week that the government is paying close attention to the economic situation in the first quarter of this year and fine-tuning of macro policies should begin in the first quarter.

Zhao Qingming, a senior researcher with China Construction Bank, shared with this view, saying that the cut is the government’s fine-tuning move, which aims to secure growth as current economic prospects remain gloomy.

The economy has been slowing last year caused by a shrinking external market and the government’s tightening measures to contain runaway inflation.

China’s economy expanded by 9.2 percent year-on-year in 2011, with its GDP growth rate dropping to a 10-quarter low of 8.9 percent in the fourth quarter, according to the National Bureau of Statistics (NBS). . . .

China cuts RRR to ease credit crunch|Economy|chinadaily.com.cn

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