Thursday, October 23, 2014   

China lowers reserve requirements for rural banks
(04-22 18:08)

China will cut the amount of funds rural banks must keep in reserve by up to two percentage points, the central bank said Tuesday, easing monetary policy in a bid to boost its slowing economy.
The announcement comes after the government said last week that gross domestic product grew 7.4 percent year-on-year in the first quarter, sharply down from 7.7 percent the previous three months owing to a slow global recovery as well as domestic structural reforms, AFP reports.
Starting Friday, the reserve requirement rate (RRR) for county-level rural commercial lenders will be trimmed by two percentage points and the rate for county-level rural cooperative banks will be cut by 0.5 percentage points, the People's Bank of China said in a statement.
The move was meant to "guide (investors) to increase agriculture-related investment and further improve the capacity and level of rural financial services'', the statement said.
The State Council, China's cabinet, said last week it would allow a lower RRR rate for some rural banks but offered no details.
China last adjusted reserve requirements in 2012, cutting them to 20 percent for large financial institutions and 16.5 percent for smaller ones.
But rural lenders have even lower requirements, officials have said.
Chinese leaders have publicly ruled out a massive stimulus package to jumpstart growth as the world's second biggest economy tries to shift away from investment as a major economic driver, but it has unveiled tax breaks for small firms and railway construction for a boost.
Analysts have said that the "targeted'' step of cutting rural banks' reserve requirements lessened the chances of a broader cut in the short term.
"Within the framework of a stable monetary policy stance, the structural adjustment in the RRR this time will not affect the overall liquidity in the banking system,'' the central bank statement said.
"Next, the People's Bank of China will continue to implement the stable monetary policy and keep liquidity at an appropriate level,'' it added.   
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