China to Boost Liquidity as Economy Slows: Report

Effort to boost lending comes as manufacturing activity is almost dormant.

China will ease monetary policy and boost liquidity in the financial system with a series of measures, state media cited a central bank official as saying, in a bid to avoid a sharp economic slowdown.

According to the official Xinhua news agency, the unnamed official at the People's Bank of China said it planned to "steadily" introduce the measures, including cutting the amount of cash lenders must keep in reserve.

The report, published late Wednesday, comes as the world's number two economy eases, with data last week showing it grew at its slowest pace for almost three years in the January-March quarter, while manufacturing stutters.

As well as easing reserve requirements, the report said the central bank will also boost liquidity through its open market operations -- referring to its sale or purchase of securities, which influences the volume of money and credit in the economy.

"The central bank will continue to implement a prudent monetary policy... and maintain a reasonable level of interbank liquidity to facilitate a stable and relatively rapid development of the national economy," the official said.

China will "fine-tune" its monetary policy to allow more growth in bank lending, the official added, reiterating remarks by other officials about the need to adjust money policy.

The People's Bank of China has already cut bank reserve requirements twice since December last year, as policymakers look to get money through to the small businesses and the agricultural sector that play a crucial role in the economy.

Chinese banks have already ramped up lending, issuing 1.01 trillion yuan ($160.3 billion) in new loans in March, higher than the 710.7 billion yuan recorded in February, official data showed last week.

The central bank declined to comment on the report.

Investors have been waiting for Beijing to announce measures to ease monetary policy for several weeks as figures show manufacturing activity almost dormant, while in February the country posted its biggest trade deficit in more than a decade.

Friday's figures showing the economy grew just 8.1% were well below the 8.9% recorded in the last quarter of 2011 and marked the fifth consecutive quarterly slowdown.

Copyright Agence France-Presse, 2012

See also:

Chinese Manufacturing Slows, Spurring Growth Fears

TAGS: Trade
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