Room to adjust reserve ratio

Updated: 2012-03-15 09:31

(China Daily)

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Senior economic officials said on Monday that they might encourage bank lending, while also hinting that the country's currency might not appreciate as rapidly as it has in recent years - a contentious issue in the United States presidential campaigns this year, says an article on nytimes.com. Excerpt:

Speaking at a news conference, Zhou Xiaochuan, the governor of China's central bank, said bank reserve requirements - the percentage of deposits that banks must hold back - could be loosened further after having been eased already last month.

"We have a lot of room to adjust the reserve ratio," Zhou said. "On the other hand, it is necessary to see whether there is a necessity to adjust." The reserve ratio was tightened throughout 2010 and 2011 after a huge government stimulus program of bank lending set off a bubble in real estate prices.

In the first two months of this year, these measures began to bite, and bank lending fell - possibly faster than officials expected. Normally, as many as a quarter of all bank loans in a year are made in this two-month period. This year, however, only 18 percent of the expected bank loans for 2012 were made, implying either sharply slowing demand for loans or bank liquidity problems.

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