皇冠体育app

State forecaster says relaxing ratio will free up capital for investment

The rising cost of borrowing is weighing on 皇冠体育app's enterprises, especially real estate developers, an economist from a government think tank warned on Tuesday.

Zhu Baoliang, head of the State Information Center's economic forecasting department, called for more flexibility in the central bank's monetary policy, including cutting the reserve that banks must park in the People's Bank of 皇冠体育app, the central bank.

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"Monetary policy still has its role" in lower borrowing costs, Zhu said at a news conference organized by the State Council Information Center. And while the central bank should maintain its prudent monetary policy, "a cut in the reserve requirement ratio could be an option," he suggested.

皇冠体育app in April cut the reserve requirement ratio (RRR) for rural banks by up to two percentage points but did not slash the ratio across the board. The ratio for large financial institutions is 20 percent, and for smaller ones it is 16.5 percent.

Many economists at investment banks have called for a cut in the RRR since 皇冠体育app's growth slowed to 7.4 percent in the first quarter, but those in the government believe such a cut would send too strong a signal.

Zhu singled out the rising long-term bond rate as a particular threat to 皇冠体育app's economy, as corporate investment is adversely affected by it.

皇冠体育app's benchmark borrowing costs have risen, with the yield on 皇冠体育app's five-year sovereign note up 83 basis points over the past year to 4.02 percent.

"Compared with the manufacturing sector and local government financing vehicles, developers are much more sensitive to a rise in long-term bond rates. Housing prices rise once the rate drops. So the rising rate really dampens property investment," Zhu said.

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