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More policy easing on way to boost economy
More policy easing on way to boost economy
[Date:04-20-2012]

China's central bank has indicated that a further relaxation of monetary policy is on the horizon, such as more cuts in the reserve requirement ratio for commercial lenders to ensure adequate liquidity in the financial system.

"We will continue to implement prudent monetary policies, and fine-tune the measures when necessary to guide credit growth in a stable and appropriate way," Xinhua News Agency cited an official from the People's Bank of China as saying on Wednesday night.

In the coming months, the central bank will adjust banking liquidity, and take "targeted" action by considering foreign exchange inflows, capital demand, and short-term special factors, it reported.

"For instance, we could inject more liquidity through larger-scale repurchasing operations, a lower RRR, and matured central bank bills."

The official added that the central bank will provide timely liquidity support to financial companies facing a shortage of capital because they gave assistance to small enterprises and agriculture-related industries.

Zhang Zhiwei, chief China economist at Nomura Holdings Inc, was quoted by Bloomberg as saying that the central bank had "sent the market a signal that further loosening measures will be rolled out".

China's first-quarter GDP growth slowed to 8.1 percent year-on-year, falling below market expectations of 8.4 percent, and the central bank is likely to step up its policy easing over the remainder of the year. The next RRR cut could come as early as this month, said Liu Ligang, head of China economics at Australia and New Zealand Banking Group Ltd.