Talk of fresh easing by China's central bank stirs markets
The central bank is reported to have injected billions of yuan into the interbank market and increased loan limits for commercial lenders
Talk of fresh central bank action to ease mainland credit conditions gripped markets yesterday on news reports that the People's Bank of China had injected 400 billion yuan (HK$501 billion) into the interbank market and raised lending limits for commercial banks.
The interbank injection, which sources said was made through China Development Bank, follows a 500 billion yuan liquidity push in September into the country's top five banks, which is coming due for repayment.
"I expect some or all of that to be renewed and, in January, a half-point reduction in the reserve requirement ratio," Paul Markowski, the president of MES Advisers and an adviser to the mainland financial authorities, told the South China Morning Post.
A cut to the ratio would free billions of yuan for lending that banks must otherwise keep on deposit at the central bank.
"It would definitely ease the pressure if the high RRR level - at 20 per cent - can be lowered," a Bank of China official told the Post on condition of anonymity.
The official added that raising loan-deposit ratios was less important for banks as the problem they faced was in growing their deposit bases for lending.