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ECONOMY
Weekly Watch> WEEKLY WATCH NO. 49, 2011> ECONOMY
UPDATED: December 2, 2011 NO. 49 DECEMBER 8, 2011
Loosening Liquidity
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The People's Bank of China, the central bank, reduced the reserve requirement ratio for the first time in three years to replenish liquidity.

The latest cut, effective December 5, drops the ratio by 0.5 percentage points to 21 percent for large commercial banks and 17.5 percent for small and medium-sized banks. The move is expected to release around 396 billion yuan ($62.38 billion) into the banking system.

Analysts believe it signals that policymakers are taking actions to switch the focus to maintaining growth since inflation is already tapering off.

"This move is within market expectations, and it will help ease the banks' credit strains," said Lian Ping, chief economist with the Bank of Communications. "It will also help stabilize economic growth by strengthening the banks' ability to lend."

Guo Tianyong, Director of the China Banking Research Center at the Central University of Finance and Economics, said the moves should not be seen as a drastic switch in the country's monetary policy.



 
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