China to lower reserve requirement ratio

From the China Daily…
BEIJING – China will lower banks’ reserve requirement ratio (RRR) by
0.5 percentage points starting May 18, the country’s central bank announced Saturday.
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.
Analysts say the central bank’s move is to further release liquidity against the
backdrop of current slowdown in economic growth. The cut will release an estimated
400 billion yuan (63.49 billion US dollars) in capital into the market.
China had previously lowered the RRR by 0.5 percentage points on February 24.
“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,”
Lian Ping, chief economist of Bank of Communications, told Xinhua.
“The central bank lowers the RRR now with a view of releasing additional liquidity and
strengthen the market vitality,” he said.The central bank in December cut the RRR by
0.5 percentage points for the first time since December 2008, after hiking the RRR six
times last year in an effort to check inflation.

8 comments

  1. IAMSLATTERY says:

    Dan-
    This is not a good trend.
    You think it was necessary, will it add to the speculation fire and will they raise them anytime soon?

  2. D.Collins says:

    Ya, for sure a good trend. i wish they would lower the rates as well. Currently bank loans for commercial companies are 8-9% per annum. Tough to make money in that environment. As before, I am a big proponent of China letting the RMB strengthen. I believe most of the problems with the Chinese economy (inflation) revolve around pushing the RMB down to far for to long. They should let it rise and enrich their citizens.

  3. IAMSLATTERY says:

    You sound like a watcher of CNBC with this comment man.

    Enrich who? Savers and PM stackers or speculators? How do you have a strong currency when it is easier to get and use with less Trust?

  4. D.Collins says:

    Enrich the Chinese people who bust their ass every day for peanuts. The low RMB is only helping the Chinese government collect more trade surplus and they buy U.S treasuries. It also helps the factory owners. A stronger RMB will raise the living standards of the Chinese people who buy imported oil and virtually every other commodity. The current situation just results in rapid inflation, vegetable prices up 35% here in 2012. The common man gets poorer.

  5. IAMSLATTERY says:

    Okay, so how does lower reserve requirements create Value and Trust for the workers then?

    I am still hard pressed to believe how interest rates on currency at all helps any one who really works for a living – in the long run. Your example seems to be just an excuse to say we will steal less than before.

    No?

    • D.Collins says:

      I think you misunderstand me. Its a good trend for stocks and GDP growth but for the overall real economy I am not in favor of reducing the RRR requirement. Would much prefer appreciation of the RMB, that will but more purchasing power to the lower classes and let factories who are importing commodities breath little easier.

  6. IAMSLATTERY says:

    How about what I said about intrest rates stealing from all labor?

    • D.Collins says:

      Agreed. Artificially low interest rates from the fed is central planning and only enriches people
      who have access to the printed money funnel. On the other side are savers and people on fixed incomes
      who will loose everything through inflation. if you look at the U.S., the economy was turned over to the financial powers decades ago, that is why GE got into the business of subprime loans in Eastern Europe and GM got into home financing. Because when money in getting pushing out into the markets it crowds out real productive enterprises and everyone focuses on making money off of money.

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