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

  • From condoms to caskets: merchandise marks Canada's 150th birthday

    Economic CBC News
    It's been said that Canadians are not brash about their patriotism, but you wouldn't know it from the variety of merchandise, big and small, being snapped up in advance of Canada's 150th birthday July 1. From T-shirts to hats, flags to flasks, condoms to caskets, goods adorned with celebratory logos are popping up faster than you can say sesquicentennial. Source
  • Canadian lumber producers brace for second round of softwood lumber duties

    Economic CTV News
    MONTREAL -- Canada's softwood lumber industry is bracing for a second wave of U.S. duties expected to come Monday that could put further pressure on producers, particularly smaller ones, to cut jobs. The U.S. Source
  • Warning labels might be coming to cheese: CBC's Marketplace consumer cheat sheet

    Economic CBC News
    Miss something this week? Here's the consumer news you need to know from CBC-TV's Marketplace. Get this in your inbox every Friday. Sign up here. Fake drugs American prosecutors accuse CanadaDrugs.com and its CEO Kris Thorkelson of selling unapproved and counterfeit cancer drugs to U.S. Source
  • Debt, protectionism could drag down improving global economy

    Economic CTV News
    FRANKFURT -- The global economy has picked up and prospects for the next few months are the best in a long time. But the recovery is maturing and faces risks from populist rejection of free trade and from high debt that could burden consumers and companies as interest rates rise. Source
  • Air bag maker Takata bankruptcy expected Monday

    Economic CTV News
    DETROIT -- Drowning in a sea of lawsuits and recall costs, Japanese air bag maker Takata Corp. is expected to seek bankruptcy protection in Tokyo and the United States early Monday. Takata was done in by defective air bag inflators that can explode with too much force, spewing out shrapnel. Source
  • How Sears' troubles could hasten radical change in Canada's malls

    Economic CBC News
    Sears' plan to shut down 59 of its locations is grim news for the chain's landlords across Canada. Could it also spell doom for the nation's neighbourhood malls? Anchor tenants — typically big department stores — have always been a critical component of mall design. Source
  • Proposed rules for CRA amnesty program could expose more tax-cheat advisers

    Economic CBC News
    The Canada Revenue Agency is tightening its amnesty program for tax cheats, including a proposed rule that could expose more of the shady advisers who set up dodgy tax schemes to help clients hide their money. Source
  • Italian PM 'guarantees' savers' accounts in 2 troubled banks

    Economic CTV News
    ROME -- Italy's premier says holders of accounts in two troubled Italian banks will have their savings guaranteed despite insolvency proceedings. Premier Paolo Gentiloni was referring to Veneto Banca and Banca Popolare di Vicenza, each struggling with unpaid loans. Source
  • Forget the poop scooping: who will pay the bills for your pet?

    Economic CBC News
    The scene is so common, it's cliché: Your adorable child looks longingly into your eyes, begging for a pet. You somehow navigate the emotionally fraught minefield of cat vs. dog. Then it's time to talk chores. Source
  • 'Eventually, many will run out': How an LCBO strike could impact restaurants and bars

    Economic CBC News
    A long drawn-out strike by liquor store workers could have a significant impact on Ontario's restaurants, wine importers, bars and consumers — but it may offer a boon to some local wineries. "Eventually, many [restaurants and bars] will run out, if not all, if it goes into a month, two months," said Tony Elenis, president and CEO of the Ontario Restaurant Hotel and Motel Association. Source