China To Reduce Private Bank’s Capital Reserves

China aims to cut the proportion of cash that commercial banks must keep with the People’s Bank of China, the banking regulator said on Friday, signalling further monetary loosening although the IMF and World Bank say the economy is doing fine.

The China Banking Regulator Commission (CBRC) did not say when reductions in banks’ reserve requirement ratios would be made, but it is the third time in as many months that Beijing has signalled a cut in RRRs, which would free up more cash for lending needed to shore up growth.

The CBRC did, however, qualify its comments, saying RRR reductions would be available to those banks whose lending to small firms and the farm sector warranted the reward. It did not elaborate.

The central bank also signalled on Friday that it would keep credit supply ample by letting China’s main money market rate fall again this week.

Aside from prospects for reductions in banks’ RRR, two bankers told Reuters on Friday that the central bank has also lent $16 billion to commercial banks so that they can issue the money to farming projects.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza