Another brick in China's firewall

China's cut to commercial bank reserve requirements suggests growing concern about Europe's debt crisis, but it may help Beijing avoid problems seen in 2008.

China’s central bank announced on the evening of November 30 that it would cut the reserve requirement ratio for commercial banks by 50 basis points, effective today. After the reduction, the RRR will be 21 per cent for large Chinese financial institutions and 17.5 per cent for smaller ones. The cut is expected to free up about 350 billion-400 billion yuan ($55 billion-$63 billion) in liquidity to help fund bank lending in the coming months. With the deteriorating eurozone crisis affecting China’s already uncertain economic outlook, an RRR cut was anticipated, though the markets did not expect it until next quarter.



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