China implements banking reform to boost economy

14 May 2012

Banks across China are now required to hold a lower proportion of their assets in reserve as the government attempts to find ways to boost the country's economy.

The People's Bank of China (PBOC) has announced financiers operating in the Asian superpower will now be legally-obliged to maintain 20 per cent of their assets to cover themselves against potential issues in the future.

This represents a cut of 0.5 of a percentage point and officials at the central institution are hopeful this reduction will free up billions of yuan in the banking industry, which can then be used to lend and provide extra fluidity in the general economy.

Last week, China posted weak consumer price growth, retail sales, factory production and trade figure, which contributed to the growing feeling among analysts that the nation is struggling to maintain strong growth.

Mark Williams, chief Asia economist at Capital Economics, told RTT News: "April's awful data suggest that officials so far this year have been too sanguine about the state of the economy."

By Gary Cooper

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