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China to cut reserve requirement ratio again
Source:Globaltimes.cn Published: 2012-5-13 17:43:00
People's Bank of China announced on May 12 that China will cut banks' reserve requirement ratio (RRR) by 0.5 percentage points starting May 18. Photo: Agencies
| Latest News |
| China to cut reserve requirement ratio by 0.5 percentage points China will lower banks' reserve requirement ratio (RRR) by 0.5 percentage points starting May 18, the country's central bank announced on May 12. The cut, the second of its kind this year, will drop the RRR for the country's large financial institutions to 20 percent and the medium- and small-sized financial institutions to 16.5 percent, according to the People's Bank of China. |
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| More Actions Needed as China Slows Further Weaker-than-expected economic data added to the gloom in the world's second-largest economy, highlighting the need for Chinese policymakers to stabilize the rate of decline. |
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China continued to slow in April, as industrial production registered the lowest growth in three years of 9.3 percent. Retail sales growth slowed to 14.1 percent from March's 15.2 percent, and export growth undershot expectations by falling to 4.9 percent from 8.9 percent one month earlier. |
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●The cut will release an estimated 400 billion yuan ($63.49 billion) in capital into the market. ●The cut is favorable news to stock market and real estate market, said analyst. |
| Experts' Opinions |
| Lian Ping, chief economist of Bank of Communications |
From the April economic data released recently, we can see that China's foreign trade, investment, tax revenue and credit have all showing signs of slowdown in growth. The central bank lowers the RRR now with a view of releasing additional liquidity and strengthens the market vitality. |
| Liu Ligang, head of China economics at Australia and New Zealand Banking Group Ltd |
Renewed political risks in the euro zone and a sharp fall in market liquidity led by a drought in maturing central bank bills called for further easing of monetary policy. A reserve-ratio cut would be more effective at encouraging bank lending and accelerating M2 growth than a reduction in the intensity of open market operations. The central bank might need to continually lower the RRR by 1.5 to 2.0 percentage points this year to meet the M2 growth target including the cut this time, and the next RRR cut could come in June or July. |
| Lu Zhengwei, chief economist at the Industrial Bank Co Ltd |
Given the economic growth rate has been close to the lower limit of tolerance, and inflation rate eased to somewhere below normal level, in the second and third quarter the government would continue to loosen its monetary stance, but a large dose of relaxation is impossible. In the future the central bank would probably take more actions through open market operation and make necessary innovation to its monetary instruments. |
| Qu Hongbin, economist of Hongkong Shanghai Banking Corporation |
The reserve-ratio cut this time is not a timely adjustment according to the current economic situation, as many economists has already predicted the slowdown of growth months ago. As well, only reserve-ratio cut is not enough to stabilize economic development. The government should publish some practical measures for tax cut and provide more open fields for private capital. |
| Previous RRR Adjustment |
| Recent RRR adjustment |
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| Time |
RRR after adjustment |
Percentage retracement(%) |
| 2012/5/18 |
large financial institutions 20.0% |
-0.5% |
| small financial institutions 16.5% |
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| 2012/2/24 |
large financial institutions 20.5% |
-0.5% |
| small financial institutions 17.0% | ||
| 2011/12/5 |
large financial institutions 21.0% |
-0.5% |
| small financial institutions 17.5% | ||
| 2011/6/20 |
large financial institutions 21.5% | +0.5% |
| small financial institutions 18.0% |
||
| 2011/5/18 |
large financial institutions 21.0% |
+0.5% |
| small financial institutions 17.5% |
||
| 2011/4/21 |
large financial institutions 20.5% |
+0.5% |
| small financial institutions 17.0% |
||
| 2011/3/25 |
large financial institutions 20.0% |
+0.5% |
| small financial institutions 16.5% |
||
| 2011/2/24 |
large financial institutions 19.5% |
+0.5% |
| small financial institutions 16.0% |
||
| 2011/1/20 | large financial institutions 19.0% |
+0.5% |
| small financial institutions 15.5% |
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