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Central bank gives a helping hand
By Xin Zhiming (China Daily)
Updated: 2008-05-20 09:22

The central bank announced further measures yesterday to assist the reconstruction of earthquake-hit regions.

Bank officials agreed at a meeting that companies and individuals defaulting on loan repayments due to the quake would not have this held against them.

But the central bank made no mention of the reported temporary exemption from the hike in banks' reserve requirement ratio for the six hardest-hit Sichuan regions.

The ratio, or the proportion of money banks must set aside for reserves, is set to be raised today by half a percentage point to 16.5 percent.

The six areas are Chengdu, the provincial capital, the cities of Mianyang, Deyang, Guangyuan and Ya'an, and Aba Tibetan and Qiang autonomous prefecture.

Such an exemption would be the first of its kind in China.

In a quick response to rising inflation in April, which hit 8.5 percent year-on-year, the central bank announced last Monday that it would raise the ratio, the same day the killer quake hit Sichuan.

The increased ratio will absorb up to 210 billion yuan ($30.11 billion) nationwide based on banks' current lending volume. But post-quake relief and reconstruction in Sichuan requires a speedy injection of capital in disaster-hit regions, finance experts said.

"Serious disasters, such as the Sichuan tremor, usually require a large amount of investment," said Zhang Jun, director of the China Center for Economic Studies at Fudan University.

Given April's high inflation figure, it is necessary to stick to the existing tightening policy, he said, but such a special situation should be considered for the regions worst affected by last Monday's quake.

He suggested that policymakers divert market liquidity to aid the economy in Sichuan, thus avoiding the creation of extra liquidity.

The central bank said that by Sunday the central government had allocated 9 billion in relief funds to the quake-hit regions.

Although some of the central bank facilities in the quake-hit regions have been affected, the bank has managed to ensure the smooth transfer of funds, bank officials said.

The central bank also offered loans worth 5.5 billion yuan to local financial institutions, with 3.3 billion yuan for Sichuan and 2.2 billion yuan for Gansu province, which was also affected by the quake.

Its Chengdu branch approved 1.5 billion yuan in refinancing for local lenders, especially rural cooperatives, and gave two cities, Chengdu and Mianyang, 500 million yuan each for their rediscount quotas, by which instrument lenders would have more capital available.


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