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People's Daily Online>>China Business

Cut in bank reserves to boost China's economy (2)

By Feng Jianmin (Shanghai Daily)

07:59, December 01, 2011

China has raised reserve requirements six times and interest rates three times this year to tame inflation, which has led to the country's slowest economic growth since 2009, with gross domestic product increasing 9.1 percent in the third quarter.

"The loss of foreign capital in October has resulted in a shortage of money for the banks, and the central bank is aiming to resume liquidity," said Guo Tianyong, a professor with the Central University of Finance and Economics. "But the decrease is not an indication of a change in direction for China's monetary policies."

He said he expected monetary policies to remain prudent due to still high inflationary pressure and the needs to control house prices.

His view was echoed by Fudan University professor Sun Lijian, who said the decrease in reserve ratios was temporary and warned of a return of inflationary pressure after the US and European governments offer bailouts to ease their debt crises and boost the economy.

But Qu Hongbin, a Hong Kong-based economist for HSBC Holdings, said more reserve ratio cuts may follow, while interest rates may remain unchanged until inflation is below 3 percent. "We see this surprise move as the beginning of monetary easing," Qu said.

Stephen Green, China economist at Standard Chartered Bank in Hong Kong, told Reuters: "This is a big move - this is easing. It's a clear signal that China is on a loosening mode. The next move will be another reserve requirement ratio cut in January."

Premier Wen Jiabao said in October that the government would fine-tune economic policies as needed to sustain growth while pledging to maintain curbs on real estate.

【1】 【2】


 
 
 
 
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