China cuts bank reserve ratio to kick-start economy


BEIJING: China’s central bank said Wednesday it would cut the level of funds that banks must hold in reserve by 0.50 percentage points, as the world’s second-largest economy falters.

The move, which will take effect on Thursday, follows the announcement last month that gross domestic product rose an annual 7.4 percent in 2014 — a 24-year low.

The People’s Bank of China (PBoC), the central bank, said it will “promote the healthy and stable operation of the economy,” according to a statement.

It did not give the previous level for the reserve requirement ratio, the amount of funds the PBoC requires banks to place in reserve.

In November, the PBoC slashed benchmark interest rates for the first time in more than two years, and analysts had expected further monetary easing as the economy showed more signs of distress.

An official survey at the weekend for the first time in more than two years showed China’s manufacturing activity contracting, signalling further downward pressure on the economy.

The Purchasing Managers’ Index (PMI) released by the government’s National Bureau of Statistics came in at 49.8 last month. A figure above 50 signals expansion, while anything below indicates contraction.



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