Beijing has kicked off a new round of monetary loosening, after more than two years of progressively tighter policies, by cutting the proportion of deposits that banks must hold in reserve with the central bank.
The 0.5 percentage point reduction in the reserve ratio for all banks announced on Wednesday “is a signal not only that policymakers are loosening but that they want to be seen to be doing so”, said Mark Williams, chief Asia economist at Capital Economics. “We see this as a decisive shift in policy stance from China.”
The move shows Beijing believes it has finally beaten stubbornly high inflation that peaked at an annualised 6.5 per cent in July and is predicted to have fallen well below 5 per cent in November.
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