China Attempts To Encourage Lending With Reserve Cuts

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China has announced that it will cut the amount of money which its banks must hold in reserve to encourage renewed lending.

The decision is said to mark a sudden shift in policy for the Chinese, who had previously increased the figure in order to limit lending. This previous stance saw the reserve level for China’s central bank reach 21.5% - a record high.

In an unexpected change of direction, then, the bank has announced that this will be lowered to 21% as of next Monday (5 December). This will see the rate reduced by 50 basis-points and will signal the first reduction in this rate experienced by the country for a period of almost three years.

Alongside this decision, further reductions are expected to occur over the following months, hoping to boost lending within the country. China has also made other changes to their financial stances by announcing its willingness to allow foreign issuers to sell stock (read more on this here).

Justification for the sudden change have been somewhat varied, with some commentators feeling it is an attempt to prevent underground lending within the country.

The changes to China’s reserve limit have already had an effect on their economy with the top share index rising sharply following the announcement.

The revelation was made alongside a decision for central banks to undertake co-ordinated global action to boost the global financial economy. The decision involved central banks from the Unites States, Japan, Canada, Britain, Switzerland and the Euro-zone.

Transfer Money to China

If you are looking to invest in China, think carefully about how you will be transferring money to China. Foreign currency exchange rates quoted by banks are almost always worse than the exchange rates available through specialist currency dealers.

So if you are sending money to China – which you will inevitably have to do if you are looking to make a property investment, be sure to compare the market before you buy your overseas currency.

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China Attempts To Encourage Lending With Reserve Cuts

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