Loading ...BEIJING — The People’s Bank of China is preparing to flood the country’s banking system with new liquidity to boost lending, according to officials and advisers to the central bank, as a weaker currency could spur more funds leaving Chinese shores.
The step — which involves cutting the required deposits banks are required to hold in reserve — would signal that the Chinese central bank’s exchange-rate maneuvering in the past two weeks is backfiring, forcing it to resort to the same easing measures that so far have failed to help spur economic activity.
The move, which the people say could come before the end of this month or early next month, would involve a half-percentage-point reduction in bank’s reserve-requirement ratio, they say, potentially releasing 678 billion yuan ($106.2 billion) in funds for banks to make loans.
It would be the third comprehensive reduction in the reserve requirement this year. Another option being considered at the PBOC is to only target the cut to banks that lend large amounts to small and private businesses — the ones deemed key to China’s future growth — though that strategy hasn’t proven effective in the past in channeling credit to those borrowers.
http://www.marketwatch.com/story/china-plans-more-steps-to-boost-bank-lending-2015-08-23