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People's Daily Online>>China Business

Banks' reserve ratio cut aims to spur growth

By Hao Hong (People's Daily)

14:50, February 21, 2012

Edited and translated by People's Daily Online

The People's Bank of China announced on Feb. 18 that it will cut banks' reserve requirement ratio (RRR) by 0.5 percentage point from Feb. 24.

It will be the central bank's first RRR cut this year, less than three months after the previous one.

The successive RRR cuts are obviously related to China's economic slowdown. Since the Central Economic Work Conference at the end of last year, “making progress while ensuring stability” has been the keynote of the country's economic work. “Stability” mainly refers to stable economic growth and stable consumer prices. Both the central and local governments are actively adjusting their policy direction to ensure stable economic growth in the second half of the year.

As a top leader said, there can be no development without growth. However, it must be stable and quality growth rather than blind growth. Just because growth is important does not mean the government should relax controls over certain industries such as the real estate industry simply to stimulate short-term GDP growth. It was proposed at the last Central Economic Work Conference that a pilot reform on the property tax should be carried out. The recent two RRR cuts are aimed at supporting small and medium-sized enterprises, and have nothing to do with the real estate industry.

However in some cities, "steady growth" has been misread. The People's Daily finds out through investigation that although the controversial policy of "Contract Tax Subsidy" for property market in Wuhu city has been suspended, the tightened fine-tuning policies for real estate market in other cities remain loose in effect. The fine-tuning policies in more than 10 cities have been listed in this report.

Facing the severe domestic and global economic situation, we need to ensure steady economic growth, meanwhile be vigilant to avoid "GDP worship".

How to avoid "GDP worship" in development? It largely depends if the local government has the ability to find a way to drive economic growth independently relying on the market and technology innovation.

Each city has its own advantages for development, the secret is to look ahead for long-term interest and guide the local develop advantages.

Lessons from these experiences indicate that we should read "steady growth" under the background of global economy slowdown, and comprehend it with the practice gained since China's opening up 30 years ago.

The so-called growth means effective growth, that is, sound and fast scientific development, along with reformation on economic growth mode and enterprise organization structure, rather than pursuing immediate profit leaving transformational development behind.

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