THE latest cut in the bank reserve requirement ratio is insufficient to stave off an economic headwind in China and more stimulus policies, including an interest rate cut, are needed to boost the economy, economists said yesterday.
They were responding to the announcement by the People's Bank of China on Saturday that more money will be made available for lending effective from Friday as it cut the amount commercial banks must hold as reserves.
The ratio cut may free about 420 billion yuan (US$67 billion).
The move came on the heels of last Friday's economic data which revealed a surprising drop in bank lending, trading, investment, and domestic consumption. Bank lending in April fell 61.2 billion yuan from a year earlier to 681.8 billion yuan, the lowest so far this year, the PBOC said.
Indeed Premier Wen Jiabao said in April that China needs to prepare "backup plans" in case growth weakens further. For many analysts, the data for April have confirmed further weakening.
"Most of the economic indicators in April are weaker than expected," the Agricultural Bank of China said in a report yesterday. "The central bank may cut interest rate in the second or the third quarter if economy does not pick up."
Other analysts also favored an "asymmetric interest rate cut," referring to an unchanged borrowing rate while the lending rate is cut.
"We call for an asymmetric interest rate cut to protect economic growth," said Yuan Jiang, an analyst with AgBank.
Sun Lijian, a professor at Fudan University, predicted the PBOC to cut interest rate to help the economy. He argued that another cut in the ratio "cannot be delayed."
They were responding to the announcement by the People's Bank of China on Saturday that more money will be made available for lending effective from Friday as it cut the amount commercial banks must hold as reserves.
The ratio cut may free about 420 billion yuan (US$67 billion).
The move came on the heels of last Friday's economic data which revealed a surprising drop in bank lending, trading, investment, and domestic consumption. Bank lending in April fell 61.2 billion yuan from a year earlier to 681.8 billion yuan, the lowest so far this year, the PBOC said.
Indeed Premier Wen Jiabao said in April that China needs to prepare "backup plans" in case growth weakens further. For many analysts, the data for April have confirmed further weakening.
"Most of the economic indicators in April are weaker than expected," the Agricultural Bank of China said in a report yesterday. "The central bank may cut interest rate in the second or the third quarter if economy does not pick up."
Other analysts also favored an "asymmetric interest rate cut," referring to an unchanged borrowing rate while the lending rate is cut.
"We call for an asymmetric interest rate cut to protect economic growth," said Yuan Jiang, an analyst with AgBank.
Sun Lijian, a professor at Fudan University, predicted the PBOC to cut interest rate to help the economy. He argued that another cut in the ratio "cannot be delayed."
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