China Eases Bank Restrictions

Confirmation from the central bank that the strict limits on bank lending have been relaxed to help sustain rapid economic growth. People’s Bank of China spokesman Li Chao also told Xinhua that China must be flexible over monetary policy. Banks’ reserve requirement ratios are being left unchanged, though, as, Li said, there was ample liquidity in the banking system.

Li’s remarks are only the latest, if clearest, signals of the policy shift to ease bank restrictions. Earlier this week, a former official said that the central bank was no longer enforcing the quotas on small business loans imposed earlier this year, and that it may scrap the quarterly quotas for 2009. Loan controls were imposed and enforced in the first half of 2008 to slow credit growth and prevent the economy from boiling over. That though was three interest rate cuts in six weeks and a global economic slowdown ago.

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