Nation focuses on rapid rebound in property market

Cut in banks’ reserve requirement ratio possible: experts

The State Council, China’s cabinet, has signaled a possible cut in banks’ reserve requirement ratio (RRR) at an opportune time, in an effort to ramp up financial support for the real economy.

The keenly followed monetary policy move will add to the central government’s plan to send supervisory task forces to promote local implementation of pro-growth measures, and a fresh call from financial authorities to stabilize lending to property developers.

The multi-pronged push will assure the markets of ample liquidity at a time when the economy is navigating multiple headwinds, economic observers said, and they expressed hope for an upturn in activity.

Chinese Premier Li Keqiang on Tuesday presided over a State Council executive meeting, which vowed more financial support for the economy, state broadcaster CCTV reported Wednesday.

The country will use reserve requirement cuts and other monetary policy tools at an appropriate time to maintain reasonable and ample liquidity, according to the meeting. The Chinese cabinet also vowed to guide banks to surrender part of their profits to outstanding inclusive loans to small and micro-sized businesses, and step up support for debt insurance by private firms.

This kind of official message, which is often the prelude to a move by the central bank to lower RRR, is considered a further boost to the economy.

It would supposedly be a targeted reduction of RRR that begins this weekend, Tian Yun, a Beijing-based economist, told the Global Times on Wednesday.

The previous RRR reduction, a 25-basis point cut to financial institutions’ reserve requirements, was in April when the central bank released about 530 billion yuan ($74 billion) in long-term capital.

The possible monetary move is needed to fend off liquidity woes, Tian said, citing the fallout of recent big swings in the bond market amid a wider gap between Chinese and US interest rates.

The cabinet’s Tuesday meeting stressed fully implementing a package of policies and follow-up measures to stabilize the economy and consolidate the foundation for a recovery.

Simultaneously, the central bank and the banking and insurance regulator on Wednesday issued a 16-point notice to ensure that the financial sector provides support for the steady and healthy development of the real estate market.

It also stressed stabilizing lending for real estate developers and treating all types of state-owned and private real estate enterprises equally.