Business

China cuts bank reserve ratio to boost lending

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Media captionAsia's emerging currencies can remain resilient, despite the euro crisis, says Peter Redward from Redward Associates

China's central bank has cut the amount of money banks must keep in reserve, in an effort to boost lending and sustain economic growth.

The reserve requirements will fall half a percentage point from 24 February, the People's Bank of China (PBOC) said.

Analysts said this could add as much as 400 billion yuan ($63.5bn; £40bn) to the financial system.

The Chinese economy is showing signs of slowing as Europe's debt crisis hurts Chinese exports.

Slow and steady

China's ruling Communist Party is trying to sustain growth in the second-largest economy in the world, whilst continuing to rein in consumer prices.

Inflation hit a three-year high in July last year, but has since fallen to 4.5% in January.

The government warned that inflation still remained above target.

"Economic downward pressures co-exist with price rise pressures," said Jin Qi, an assistant governor with PBOC, in comments published on Sunday.

Analysts said his words meant that further easing would come slowly.

"Policy easing will be gradual given the central bank sounded cautious about inflation in its fourth-quarter monetary policy report," said Hua Zhongwei from Huachuang Securities in Beijing.

The last reserve requirement cut in November was the first since 2008.

Property pressure

The need to tame prices comes after an earlier stimulus that increased inflationary pressures including on the housing market.

Image caption Chinese authorites are trying to balance downward economic pressures with high consumer prices

Data released on Saturday indicated that property prices were continuing to cool off.

Prices failed to rise in any of the 70 cities the National Bureau of Statistics monitors as part of its economic assessements. Chinese authorites do not provide a national average.

However according to calculations carried out by Reuters news agency, average home prices fell 0.2% in January from December, dropping for the fourth straight month.

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