Saturday, May 12, 2012

China acts to boost loans, bolster flagging economy

(Reuters) - China's central bank cut the amount of cash that banks must hold as reserves on Saturday, freeing an estimated 400 billion yuan ($63.5 billion) for lending to head-off the risk of a sudden slowdown in the world's second-largest economy.

The People's Bank of China delivered a 50 basis point cut in banks' reserve requirement ratio (RRR), effective from May 18, the third cut in six months and one that investors had called for after data on Friday showed the economy weakening, not recovering, from its slowest quarter of growth in three years.

Industrial production weakened sharply in April and fixed asset investment - a key growth driver - hit its lowest level in nearly a decade, surprising many economists who thought Q1's 8.1 percent annual rate of growth marked the bottom of a downswing and were expecting signs of recovery in Q2 data. Read More