China loosens credit rules to bolster flagging growth rates
CHINESE authorities have cut the amount of money the country’s banks have to hold, in the hope of stimulating the economy and bolstering growth.
The 50 basis point cut leaves the reserve ratio requirement at 20 per cent, effective from 18 May, allowing banks to boost lending by around 400-500bn yuan (£39.4bn to £49.2bn).
Interest rates fell moderately, but appear not to have been affected by the ratio cut, as they have already moved down in recent weeks.
It follows a run of data showing the economy slowing, and is the second such move this year. But as China is not seen as lacking liquidity, analysts say the move is more symbolic and could herald further, more substantive policy changes.
“The government will likely take further measures to support growth, including implementing more investment focusing on social welfare-related investment projects and infrastructure in rural areas and the western region,” suggested Barclays’ Yiping Huang, who also believes tax cuts may boost growth.