China’s central bank cuts requirement to support small firms

China’s central bank cuts requirement to support small firms

China's central bank, People's Bank of China has announced its decision to allow reserve-requirement cut to Industrial Bank Co. and China Minsheng Banking Corp in order to allow the small firms to boost business.

The central bank is aiming to boost economic growth without the need for a large scale economic stimulus programme. The PBOC has approved a half percentage-point cut for Industrial Bank and Minsheng Bank.

Analysts also said that the China Merchants Bank Co. was also included in the list. Officials are aiming to increase growth as the world's second largest economy is expected to record its slowest growth since 1990. However, they are not in favour of a major economic stimulus package that would increase credit risk for the economy.

The central bank is expanding the group of lenders covered by a reserve-ratio move and is aiming to increase funding for small and micro businesses and agriculture in the country. Analysts said that the move shows that the China's neutral monetary policy is moving towards relaxation to boost economic growth but the central bank does not want to go all out and offer large scale economic stimulus to the Chinese economy.

The three banks had about 7 trillion yuan of combined deposits during the previous year indicating that a half point relaxation will free up about 35 billion yuan for the banks.

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