China cuts bank reserve rates

China cuts bank reserve rates

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China's central bank cut the required reserve ratio, a metric which determines how much money the nation's banks must set aside, by 0.5 percentage points effective February 24, The Wall Street Journal reported. The ratio for China's largest banks will fall to 20.5% after the reduction; smaller banks have lower, variable rates. Ma Xiaoping, an economist with HSBC, said that the move would release about RMB400 billion (US$63.5 billion) of funds into the economy. The cut may be a sign that China's financial authorities are prepared to ease monetary conditions in the event of a slowdown this year. Some analysts had predicted that a cut would not come until February's economic data was released, because the January data was distorted by the Lunar New Year holiday season. Bank of America predicted that the cut could help the country's equity markets extend their gains for a sixth consecutive week.