MNI POLICY: China Cuts Reserve Ratios, Unlocks CNY900 Billion

     BEIJING (MNI) - China's central bank further cut the amount of reserves

lenders must set aside on Friday, unlocking CNY900 billion in long-term

liquidity as the world's second-largest economy seeks to encourage lending and

reignite growth.

     The People's Bank of China will implement a 0.5 percentage point

across-the-board cut in banks' reserve requirement ratios on Sept. 16, it said

on its website. In line with its focus on helping small businesses, city

commercial banks will receive another 1 pp cut, carried out in two

0.5-percentage point installments on Oct. 15 and Nov. 15, the central bank said.

     The cut was anticipated in MNI's Sept. 4 story (MNI Exclusive: China Should

Cut Rates, Advisors Say). Expectations for such a measure grew after signals in

speeches this week by top officials including Vice Premier Liu He and Ni Jizhe,

vice chairman of the National Development and Reform Commission.

     The across-the-board cut will inject CNY800 billion into the economy, while

the 1 pp cut to smaller lenders will free up another CNY100 billion, the central

bank said. It will also reduce banks' costs by CNY15 billion each year, it said.

     Policymakers aim to match the growth rate of the M2 measure of broad money

and of aggregate financing to the economy with that of nominal GDP, and to

increase countercyclical measures, They are not seeking a "credit flood," the

central bank said, adding that its prudent monetary policy stance has not

changed.

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

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