China moves to shore up slowing growth

BEIJING -- In a step to shore up slowing economic growth, China freed up more money for lending Monday by cutting the amount its banks are required to hold in reserve.

See Full Article

The move follows declarations by Chinese leaders that they have room to boost growth despite concern in global financial markets about capital outflows and stock and currency turmoil.

The amount of deposits commercial lenders will be required to leave with the central bank will be cut by 0.5 percentage points on March 1, the central bank announced. That would reduce reserve levels for the country's major state-owned banks to 17 per cent of deposits -- still by far the world's highest level.

"The aim clearly is to support the economy at a time when downward pressures on growth remain strong and uncertainty is elevated," Louis Kuijs of Oxford Economics said in a report. "This move suggests that for China's policymakers, growth remains key."

The reduction is the second in just over four months, following a similar 0.5 per cent point cut on Oct. 23.

It followed a declaration Friday by Premier Li Keying, the country's top economic official, to global finance ministers meeting in Shanghai that China has "potential, resilience and flexibility" to deal with economic challenges.

China's economic growth fell last year to a 25-year low of 6.9 per cent and is forecast to fall further this year.

Beijing's room to manoeuvr has been reduced by turmoil over China's currency, the yuan, since the surprise introduction of a new mechanism for setting the state-controlled exchange rate last Aug. 12.

The yuan has slid in value since then, prompting an outflow of capital that spiked to a record $135 billion in December. An interest rate cut to perk up economic growth would make the yuan even less attractive, possibly fueling further outflows.

"Today's move suggests that concerns about capital flows have eased," Mark Williams of Capital Economics said in a report. "It may be that the PBOC senses that speculative pressure has diminished or that closer monitoring of capital flows has helped slow the flow."

The move also suggests Chinese leaders are less concerned about excessive lending following strong credit growth in January. That prompted concern they might tighten controls to prevent a run-up in already high debt levels.

"A further acceleration of credit will only deepen concerns about bad debt and over-investment. But these are issues for the medium term," said Williams. "For now, the emphasis is on shoring up growth in the near term."



Advertisements

Latest Economic News

  • Union representing 2,000 Quebec workers unsure about CSeries Airbus deal

    Economic CTV News
    MONTREAL -- Quebec workers with Bombardier's CSeries plane program have mixed feelings about the deal with Airbus giving the European aerospace giant a controlling stake in the aircraft, a union representative said Tuesday. David Chartrand, Quebec co-ordinator for the International Association of Machinists and Aerospace Workers, said the deal means access to a massive market and possibly more jobs. Source
  • Sears Canada's registered retirement plan appoints new administrator

    Economic CTV News
    VANCOUVER -- Morneau Shepell is taking over administration of Sears Canada Inc.'s registered retirement plan. The Financial Services Commission of Ontario says in a statement that the Ontario Superintendent of Financial Services appointed the human resources consulting and technology company after a competitive tendering process. Source
  • Liberals to narrow scope of passive-income measure for private corporations

    Economic CBC News
    The federal government is moving to pare down its controversial tax proposal on passive income so that it will only affect three per cent of private corporations. Finance Minister Bill Morneau will be in New Brunswick on Wednesday to unveil changes to his passive investment proposal so that it only targets unfair tax advantages used by the wealthy, a senior government official told The Canadian Press. Source
  • Freeland calls U.S. NAFTA demands 'troubling' and 'unconventional'

    Economic CBC News
    Foreign Affairs Minister Chrystia Freeland accused the United States of deliberately trying to undermine the North American Free Trade Agreement, calling its list of unconventional proposals "troubling." Her remarks came during a tense joint news conference as the fourth round of NAFTA talks wrapped up in Arlington, Va. Source
  • Veteran investor booted from Sprott board after racist comments

    Economic CTV News
    TORONTO -- Veteran investor Marc Faber was asked to resign from the board of directors at Sprott Inc. after comments he made in his investment newsletter that America was better off because it was settled by white people instead of black people. Source
  • Veteran investor Marc Faber booted from 3rd company after racist comments

    Economic CTV News
    TORONTO -- Veteran investor Marc Faber has resigned his board seats at three companies based in Canada on Tuesday following comments he made in his investment newsletter that America was better off because it was settled by white people instead of black people. Source
  • Missouri appeals court tosses $72M US award in talcum powder case

    Economic CBC News
    A Missouri appeals court on Tuesday that vacated a $72 million US award to an Alabama woman who claimed her use of Johnson & Johnson products that contained talcum contributed to her ovarian cancer has thrown the fate of awards in similar cases into doubt. Source
  • Latest NAFTA round ends in a stalemate with plans to extend talks into 2018

    Economic CTV News
    WASHINGTON -- U.S. Trade Representative Robert Lighthizer says NAFTA talks are being extended into 2018 -- a tacit admission that negotiators aren't going to meet their original deadline for a deal by year-end. The proposals tabled at the latest round have revealed huge chasms in negotiating positions, on everything from dairy and autos to even the basic architecture of an agreement -- and the tone of Tuesday's news conference made clear the talks have turned downright frosty. Source
  • Veteran investor Marc Faber booted from Sprott board after racist comments

    Economic CBC News
    Veteran investor Marc Faber was asked to resign from the board of directors at Sprott Inc. after comments he made in his investment newsletter that America was better off because it was settled by white people instead of black people. Source
  • White House says Fed search down to 5 finalists

    Economic CTV News
    WASHINGTON -- A White House official says U.S. President Donald Trump has narrowed his search for the next Federal Reserve chairman to five final candidates. A decision is expected before the president begins a trip to Asia on Nov. Source