China Cuts Bank Reserve Ratio

By Douglas A. McIntyre Published Nov 30, 7:08AM EST

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

China made an unexpected cut in its bank reserve ratio. It is the first time the action has been taken in two years.

Bloomberg writes

Reserve ratios will decline by 50 basis points effective Dec. 5, the People’s Bank of China said in a statement on its website today. Before the announcement, the level was a record 21.5 percent for the biggest lenders, based on previous PBOC statements.

The move is seen as a way to help support what appears to be a flagging economy. China’s PMI has been weak for two months, and there is a fear that factory activity could begin to contract. China has posted a 9% plus GDP growth in most of the quarters of the last five years, only slowing at the depth of the 2008 recession.

Reuters writes that

The cut lowers the reserve ratio for China’s biggest banks to 21 percent from record highs, and frees up funds that could lubricate lending to cash-deprived small firms.

There will be concerns that the action could rekindle inflation which has been muted in the last quarter. Earlier in the year, food prices were up in the double digits in some cases. The price of energy was also affected by the import of crude to support industry and transportation. Many experts believe this demand helped push global oil prices above $90

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.