China said on Saturday it would cut reserves for banks, as the country seeks to engineer a soft landing for the world’s second largest economy following disappointing data released Friday. The People’s Bank of China, the central bank, said it would cut banks’ reserve requirements by 0.50 per centage points effective from May 18, according to a statement posted on its website.

The move was widely expected after China reported growth in industrial production slumped to a three-year low of 9.3 per cent in April, adding pressure on Beijing to ease monetary policy.

China’s economy grew an annual 8.1 per cent in the first quarter of 2012, its slowest pace in nearly three years.

The government is targeting economic growth of just 7.5 per cent for the whole year, down from actual growth of 9.2 per cent last year and 10.4 per cent in 2010.

Beijing has already cut bank reserve requirements twice since December as it seeks to boost lending to spur growth, but economists have called for more policy support as economic figures continue to disappoint.

After the latest move takes effect, China’s reserve requirement for most large banks will fall to 20 per cent.
Some analysts were predicting a move as early as this month, especially after easing inflation gave the government room to loosen monetary policy by cutting reserve requirements.

China also said Friday that the consumer price index, the main gauge of inflation, rose 3.4 per cent year on year in April, compared with 3.6 per cent in March.

The Independent/ Bangladesh/ 13th May 2012