China cuts bank reserve requirement

BEIJING: The Chinese central bank said Saturday that it would cut commercial banks' reserve requirement ratio by 0.50 percentage points from February 24 to ease restrictions on lending, state media reported.

The People's Bank of China last announced a cut in the amount of funds that banks must hold in reserve on November 30, a move that took effect on December 5.

The central bank said Saturday that it would reduce the ratio by a further 0.50 percentage points, effectively increasing the amount of money banks can lend, Xinhua news agency reported.

The rate for most large banks would thus decline to 20.5 percent, Dow Jones Newswires said.

The move is a sign the government is continuing to ease restrictions put in place to curb surging inflation and property prices.

Credit restrictions had fueled an explosion in underground lending as private firms borrowed money at high interest rates from informal lenders after being rejected by big banks who favor other state-controlled enterprises.

China, anxious about rising living costs, has pulled on a variety of levers to curb price rises over the past two years, including restricting the amount of money banks can lend and hiking interest rates.

Prior to the cut in December, the Chinese central bank had raised the reserve requirement ratio six times in 2011 and raised benchmark lending and deposit rates three times.

- AFP/de

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