People’s Bank of China cuts reserve requirement ratio by 50bps after ugly data12 May, 2012, 19:33. Posted by Zarathustra
After yesterday’s disastrous set of macro data coming out from China, just as many have already predicted, the People’s Bank of China ease policy.
The People’s Bank of China announced that the reserve requirement ratio will be reduced by 50 basis points, effective on 18 May. The previous cut was on February, when RRR was cut to 20.5% for large financial institutions. After the latest cut become effective, the RRR will be reduced to 20%.
Again, I doubt if banks’ lending is currently constrained by reserve requirement ratio. As the economy slows, it should not be surprising that credit demand will slow. Thus cutting reserve requirement ratio will by no means be translated automatically into higher loan growth. The latest news, however, may probably be positive for the market in the very short-term anyway.