Business / Markets

Debate swirls on reserve ratio requirement

By Gao Changxin in Shanghai (China Daily) Updated: 2014-05-28 06:56

Li gave a speech on May 22 during a visit to Chifeng, Inner Mongolia. He said that "the economy faces downside risks and we should take it seriously" and "fine-tune policies appropriately".

China's central bank governor said the country is facing unusually intricate economic circumstances at present, which pose new challenges to the bank's monetary policy.

Debate swirls on reserve ratio requirement
PBOC eases liquidity through reverse repos
Debate swirls on reserve ratio requirement
Zhou made the remark during a seminar held in east China's Zhejiang Province, a region with thriving private lending, according to an online note released by the bank on Tuesday.

China is trying to manage multiple tasks simultaneously amid increasing downward pressure, including stable economic growth, structural adjustment, reform, risk control and people's well-being.

This represents fresh challenges to the world's second-largest economy, which is striving to ensure stability and improve services in the financial sector with a prudent monetary policy, Zhou said.

He asked all branches of the PBOC to follow current monetary policy and help create a sound environment to support the local economy and facilitate national reform.

Improving financial supervision and pushing forward an inclusive financial system were also mentioned in the note.

Zhang Zhiwei, a Hong Kong-based China economist with Nomura Securities Co Ltd, said Li's comments were a signal that easing might speed up. "We believe this statement is stronger than his statements in previous speeches ... It reinforces our view that fiscal and monetary policies will be loosened in Q2 to stabilize growth and counter the macro risks from the property market," Zhang wrote in report on Tuesday.

The Goldman Sachs Group Inc said on Tuesday that easing will most likely take the form of higher credit quotas and more active open market operations from the PBOC. An RRR cut is unlikely because it sends a "high-profile" easing signal, it added.

Xinhua contributed to this story.

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