Latest News

Govt moves to boost credit

The People's Bank of China (PBC) cut the amount of cash that banks must set aside as reserves in a move to boost liquidity as the world's second-largest economy faces a continued slowdown in growth.  Full story

China cuts RRR to ease credit crunch, secure growth

China's central bank on Saturday announced to lower banks' reserve requirement ratio (RRR) on Feb. 24, underlining its efforts to ease short-term credit crunch and secure growth in the wake of a lacklustre external market.

Influence

General

Property economist Xie Yifeng: The drop in the RRR indicates a signal that the monetary policy is turning and it will not be long before we see a loosening of the money market in the future.  Zhang Dawei, an analyst with Centraline Property: The RRR cut has sent a signal for the People's Bank of China (PBC) to take measures in order to remit the money market's current tense situation. Zhao Qingming, a senior researcher with China Construction Bank:  The cut is the government's fine-tuning move, which aims to secure growth as current economic prospects remain gloomy.

Ren Ruo'en, an economics expert and professor at Beihang University: The adjustment will work very little on the market. The market has been expecting this drop for awhile and it's regarded as quite normal. Now, what the large commercial banks are concerned with is the constraints of the deposit-loan ratio, and the RRR's drop has very little influence on the banking system.  Lian Ping, chief economist at the Bank of Communications:The cut will help inject liquidity into the banking system, increase banks' lending capability, and strengthen support to the real economy.

Banking

Commodity Price

Zhao Xijun, deputy director of the School of Finance at Renmin University: The pressures of price and inflation still exist after releasing funds. Along with the progress of the reform on our price mechanism, the prices that can be originally controlled by the government such as water and oil could possibly change according to market standards. But now the international situation is not clear, so rising prices are inevitable.

Xie Yifeng: A 0.5 percent drop cannot solve the housing problem and its prices will not rise again. The current control of the real estate market has not loosened, and it will not be effective unless the RRR drops continuously 5 times, the interest experience 3 successive cuts, and the restrictions towards home buying, prices, and debt are loosened. For the real estate industry which has been eager for funds, favorable signals have yet to arrive. Zhang Dawei: The increase of liquidity will definitely make part of the funds possible to enter the property market; however, due to the large insufficiency of the entire real estate industry in 2012, its general falling trend has been a certainty. Therefore, even if some funds remit the pressure of housing enterprises, it is just delaying the time on its price reduction.

Housing Prices

Market & Stock	Li Chang'an, professor at the University of International Business and Economics in Beijing and scholar from the Chinese Academy of Social Sciences: The drop in the RRR sends a favorable message to the stock market. It is also good for real estate; however, considering the current strict controls in place, it will be hard for the real estate market to experience a boom.

Zuo Xiaolei, chief economist at China Galaxy Securities:The country's credit and investment demands are returning to a normal level as the government directs its monetary loosening to middle- and small-sized enterprises (SMEs) as well as the low-income housing projects.	SMEs

Analysis             & Expectations

 Guo Tianyong, director of the Banking Research Center at the Central University of Finance and Economics:

The reason for the RRR adjustment is the relatively low index in the macro-economy over recent months. To maintain a stable race of economic growth and a sound economic environment, the bank adjusted the RRR. Another reason is that the central bank is injecting liquidity into the banks because January data showed that the banks are suffering from a tense liquidity.

 Li Daxiao, director of the Yingda Securities Research Institute：

It shows that the focus of country's policy is directing from containing prices to stabilizing growth, which is also in line with the government's intent to fine-tune macroeconomic policy in the first quarter.

 Pan Xiangdong, an analyst with China Galaxy Securities:

Expected another one to two RRR cuts in the first half of the year, but the government will check situations in foreign exchange funds, market liquidity and inflation.      

RRR Record

Related Time Line