China reduces lenders' ratio requirements

2 December 2011

Commercial banks in China will benefit from lower reserve requirements in the near future, it has emerged.

The Asian superpower's central bank has decided to implement a downgrade in this area for the first time in around three years as it attempts to provide some stability to its stuttering economy.

Ongoing debt problems in the eurozone are having a knock-on impact on the health of the world's fastest-growing economy, meaning policymakers there are now taking measures to ease the credit strain.

As of next Monday (5 December), the nation's major banks will have to abide by a reserve requirement ratio of 21 per cent instead of the current figure of 21.5 per cent, which, it is hoped, will free up funds for use elsewhere.

Stephen Green of Standard Chartered told Reuters this represents a "big move" and a "clear signal that China is on a loosening mode".

This comes after US president Barack Obama recently called on China to take economic action sooner rather than later.

By Tony Aynsley

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