People’s Bank of China to Lower RRR by 50 BPS

China is trying to plan for a gentle landing for the economy as growth slows and inflation remains high.

The People’s Bank of China said it will decrease the reserve requirement ratio by 50 basis points from February 24, 2012. This is the first announced cut in three years, reversing a policy of ratio increases. The ratio cut will bring it down to 20.5% for the biggest banks. It will free theoretically around RMB 400 billion for new lending.

Banks with low loan-to-deposit ratios such as the China Construction Bank will have more capacity to stimulate loan growth.

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