CHINESE|ENGLISH

China likely to further cut reserve requirements (12/26/2011)

Updated: 2011/12/26 10:39:00

BEIJING - China will further cut reserve requirements in 2012 to pump liquidity into the country´s banking system, but that will not indicate a shift in the country´s monetary policy, a senior official said Sunday.

Wu Xiaoling, a former deputy governor of the People´s Bank of China, the country´s central bank, said at a forum that China will use the tool of reserve requirements more frequently in macroeconomic regulations next year.

"China will cut reserve requirements to replenish liquidity if the country´s yuan funds outstanding for foreign exchanges rise slightly or even fall in 2012," Wu said.

As of the end of November, the nation´s total yuan funds outstanding for foreign exchanges stood at 25.46 trillion yuan ($4 trillion ), down 27.9 billion yuan from the figure at the end of October, central bank data showed.

Early in December, China cut reserve requirements for commercial lenders for the first time in three years. The cut dropped the reserve requirement ratio to 21 percent for large commercial banks and 17.5 percent for mid- and small-sized banks.

Wu said the steep downward revaluation of the Chinese yuan in recent days was market´s normal response as the country´s economy slowed and some Western speculators pulled out funds from the country to stimulate their economies.

"We don´t have to be worried about the currency´s depreciation, " he said, adding that China should further increase its currency´s flexibility next year while pushing forward interest-rate liberalization in order to "let market-based instruments play a bigger role in resource allocation."

As for China´s economic growth in 2012, Wu said the country will inevitably see an economic slowdown partly due to faltering external demand, as the European Union and the United States, the country´s top two trade partners, were still struggling through their sovereign debt crisis.

Meanwhile, reduced government-led investment and weak domestic demand will also be a drag on economic growth, he added.

Wu suggested the country make more efforts to boost domestic consumption to shore up growth.

China´s economy slowed to 9.1 percent during the third quarter of the year, tapering off from 9.5 percent in the second quarter and 9.7 percent in the first quarter.

Source: Xinhua

Authority in Charge: China National Textile and Apparel Council (CNTAC)

Sponsor :China Textile Information Center (CTIC)

ISSN 1003-3025 CN11-1714/TS

CTL