Thursday, August 5, 2010

China may cut required reserves by end-Sept, says group

BEIJING: China may cut banks' reserve requirements in the next two months as part of a modest loosening of monetary policy, the country's semi-official banking association said in a quarterly report.

The National Association of Financial Markets Institutional Investors (NAFMII), a body which comes under the People's Bank of China (PBOC), said the central bank would mainly rely on open-market operations for its fine-tuning of policy in the third quarter.

"There is the possibility that it will cut the deposit reserve ratio," NAFMII said.

"With an economic slowdown, 'maintaining growth' will again become a priority in macro-economic controls," it added.

China has increased the proportion of deposits that banks must keep in reserve three times in 2010. A cut would be a powerful signal from Beijing that it was leaning towards policy relaxation ' and it would also come as a surprise.

In a Reuters poll last month, most economists forecast that the reserve requirement ratio for big banks would remain unchanged at 17 percent over the next 12 months. ' Reuters

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