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China lowers banks' reserve requirement ratio by 50 bp

The People's Bank of China, the country's central bank, announced on Feb. 18 it will cut the reserve requirement ratio by 50 basis points for the country's deposit-taking financial institutions, effective from Feb. 24.

In a statement, PBOC said it intends to lower the reserve requirement ratio to 20.5% for larger financial institutions and to 17% for small- and medium-sized financial institutions.

The move is expected to release a lending capacity between RMB 350 billion and RMB 400 billion, or around US$55.6 and US$63.5 billion, in a bid to crank up credit creation, said analysts.

This is second cut on banks' reserve requirement ratio after PBOC, on Dec. 5, 2011, lowered the ratio for the first time over the past three years.

Jin Qi, an assistant governor with PBOC, said the Chinese government would continue to stick to a prudent monetary policy for economic growth.

In January, China's consumer price index (CPI), the major gauge of inflation, rebounded to a record 4.5% over the past three months, higher than a forecast range of 4% to 4.2%, sources reported.

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