(21 February 2012 – Asia) The People’s Bank of China (PBOC) cut the amount of cash banks must hold in reserves last weekend, boosting lending capacity in a bid to ease slowing growth.The cut is set to boost the confidence of domestic stock investors, who have been eagerly awaiting clear signals of an easing monetary policy. Lending capacity was boosted by about 350-400 billion (A$51.5 – A$58.9 billion).
The PBOC cut big banks’ reserve requirement ratio (RRR) by 50 basis points to 20.5 percent, effective from next Friday, after repeatedly defying market expectations for such a move after it first cut the ratio last November.
Jin Qi, an assistant governor with PBOC, said in comments published on Sunday that China would continue to stick to a prudent monetary policy.
‘Economic downward pressures coexist with price rise pressures,’ she said.
China’s economy is likely to slow to an annual growth rate of 8.2 percent in the first quarter from 8.9 percent in the previous quarter, according to the latest Reuters poll.