China Acts to Boost Loans, Bolster Flagging Economy

SHANGHAI (Reuters) - China's central bank cut the amount of cash that banks must hold as reserves on Saturday, freeing an estimated 400 billion yuan ($63.5 billion) for lending to head-off the risk of a sudden slowdown in the world's second-largest economy.

China's central bank cut the amount of cash that banks must hold as reserves on Saturday, freeing an estimated 400 billion yuan for lending to head-off the risk of a sudden slowdown in the world's second-largest ...

Reuters - China's central bank cut the amount of cash banks must hold in reserves on Saturday, boosting lending capacity by an estimated 350-400 billion yuan ($55.6-$63.5 billion) in a bid to crank up credit creation as the world's second-biggest economy faces a fifth successive quarter of slowing growth.

BEIJING: China's central bank announced Sunday it would cut the level of funds that commercial banks must hold in reserve by one percentage point, the second such move this year to boost lending. The move, effective Monday, comes days after the world's second largest economy reported its worst quarterly growth figure for six years. In a statement on its website, the People's Bank of China (PBoC) said it will give an additional one-percentage-point RRR cut to banks for agricultural services and a further two-percentage-point cut to the Agricultural Development Bank of China.

The Chinese model of economic growth is flawed. It has wasted resources on an unprecedented scale. Empty cities, excess industrial capacity and sour construction loans litter the country. New lending yields less and less incremental growth. And the very worst construction projects aren’t producing enough cash to service debts. The Chinese economy, like most others, rests on a shaky foundation of credit. The country has completed the largest building boom in history — a boom that depended on unsustainable growth in the supply of money and credit.

China’s latest easing move signals that shoring up growth is the government’s top priority even if doing so further weakens the yuan or adds to leverage that threatens the longer-term health of the world’s second-biggest economy.

BEIJING: China's annual economic growth likely slowed to a six-year low of 7 percent in the first quarter as demand at home and abroad faltered, fanning expectations that authorities will have to roll out more policy stimulus to avert a sharper slowdown. Chinese reform-minded leaders, while emphasizing the need to adapt to "a new normal" of slower but better-quality growth, have signalled growing concern about a deeper downturn that could fuel job losses and debt defaults.