You are here

China reserve ratio cut not a signal of impending large-scale stimulus: Xinhua

Wednesday, March 2, 2016 - 11:04

36430254 - 20_10_2015 - pimco21.jpg
China's move to cut banks'reserve requirement ratio (RRR) indicates a slight easing bias in China's "prudent" monetary policy, but that is by no means a signal of any coming large-scale stimulus, the official Xinhua news agency said in a commentary late on Tuesday.

[SHANGHAI] China's move to cut banks'reserve requirement ratio (RRR) indicates a slight easing bias in China's "prudent" monetary policy, but that is by no means a signal of any coming large-scale stimulus, the official Xinhua news agency said in a commentary late on Tuesday.

The Xinhua commentary follows rising market expectations that China could implement a version of the massive stimulus it adopted during the global financial crisis, launching in late 2008 a 4 trillion yuan (S$855 billion) stimulus package to boost the economy.

The news agency said strong stimulus was not needed because China still had monetary policy tools available and China's economy was growing at a reasonable rate, with no signs of chaos or crisis in the global economy.

Xinhua stated that because China would stick to its prudent monetary policy, there would be no changes in the way the government adjusted liquidity, which would be kept at a reasonable and flexible level, it said.

sentifi.com

Market voices on:

That meant China's lending and total social financing would grow at a steady and reasonable rate, Xinhua noted.

Xinhua's view was echoed by state-owned People's Daily, which reported on Wednesday, citing economists, that the RRR cut was not stimulus, but only reflected increasing policy flexibility aimed at supporting economic development.

Late on Monday, the People's Bank of China (PBOC) announced a cut in the amount of cash that banks must hold as reserves - the reserve ratio requirement (RRR) - by 50 basis points. It frees up an estimated US$100 billion in cash for new lending.

Hong Hao, managing director of research at BOCOM International, said the RRR cut was largely liquidity neutral, because the move was intended to offset the decline in China's foreign currency reserves and to accommodate more than 1 trillion yuan of open market operations facilities due this week.

REUTERS

Nespresso
Pair your daily business read with the perfect cup of espresso.

Subscribe to The Business Times today to receive your very own Nespresso Inissia coffee machine worth $188.

Find out more at btsub.sg/btdeal

Powered by GET.comGetCom