China provided 500 billion yuan (US$81 billion) of liquidity to the country's five biggest banks as Premier Li Keqiang steps up stimulus to support economic growth, Sina.com reported yesterday.
The People's Bank of China (PBOC) yesterday started providing the banks with 100 billion yuan each through standing lending facilities with durations of three months, the news website said, citing banking analyst Qiu Guanhua at Guotai Junan Securities Co. The PBOC will complete the process today.
"This is like 'printing money,' as base money is created," Shen Jian-guang, Hong Kong-based chief Asia economist at Mizuho Securities Asia Ltd., said in an e-mail. "The immediate impact is similar to an RRR cut of 50 basic points to all banks." RRR is banks' required reserve ratio; cutting it increases the amount they have available to lend.
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The move shows the government's increased determination to support the economy even using broad-based stimulus that may exacerbate the country's mounting debt. Premier Li's target of about 7.5 percent gross domestic product growth this year is threatened by a property slump.
The weakest industrial-output expansion since the global financial crisis and moderating investment and retail sales growth, shown in data released Sept. 13, underscore risks of a deepening economic slowdown. Those readings followed a second straight drop in imports and a 40 percent decline in the broadest measure of new credit for August, as well as indicators showing a manufacturing pullback.
In a speech at the World Economic Forum in the northern Chinese city of Tianjin earlier this month, Li said the government won't be distracted by short-term fluctuations in individual economic indicators and will maintain its focus on structural adjustments and dealing with long-term issues.
The country's five largest banks are Industrial & Commercial Bank of China Ltd., Agricultural Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd., and Bank of Communications Co.
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