China allows banks to lend more in bid to boost economy

image captionChina is boosting its economy by cutting the amount of reserves banks have to hold

China has cut the amount of funds banks have to hold in a reserve, in a bid to boost its economy.

It is the third time the central bank has made such a move in six months.

It follows recent economic data suggesting that the Chinese economy is slowing down. In April industrial output growth slowed to 9.3% - the slowest rate since 2009.

The People's Bank of China says banks will have to hold half a percentage point less in reserve.

For the nation's biggest lenders it means they will have to hold 20% of their assets in cash reserves.

The move should free up banks to lend billions of yuan.

China's economy has been slowing for more than a year. In the first quarter of 2012 it grew 8.1% compared with 8.9% in the fourth quarter of 2011.

Meanwhile, China has agreed to launch negotiations for a free trade pact with Japan and South Korea.

The agreement came at a summit in Beijing.

China is already the most important trading partner for Japan and South Korea.

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