SHANGHAI/BEIJING, Feb 19 (Reuters) - China's central bank cut the amount of cash banks must hold in reserves on Saturday, boosting lending capacity by an estimated 350-400 billion yuan ($55.6-$63.5 billion) in a bid to crank up credit creation as the world's second-biggest economy faces a fifth successive quarter of slowing growth.
The People's Bank of China (PBOC) is on the course of gentle policy easing to cushion the world's fastest-growing major economy against stiff global headwinds as Europe's debt crisis grinds on, although it has been treading warily.
The cut, announced late evening, is set to boost the confidence of domestic stock investors, who have been eagerly awaiting clear signs of an easing of monetary policy.
"It's a very positive move for the stock market, and it will create a bullish stock market," Li Daxiao, the research head of Shenzhen-based Yingda Securities, said in an online note.
The PBOC cut big banks' reserve requirement ratio (RRR) by 50 basis points to 20.5 percent, effective from next Friday, after repeatedly defying market expectations for such a move after it first cut the ratio last November.
China's economy is likely to slow to an annual growth rate of 8.2 percent in the first quarter from 8.9 percent in the previous quarter, according to the latest Reuters poll.
Data for January came in below market expectations, with exports contracting 0.5 percent from a year earlier and money supply growth falling to 12.4 percent from the previous month's 13.6 percent, which analysts said argued for more easing.
"The growth implications of the below-normal lending in January are dire, should that lending pace be continued," said Paul Markowski, President of New York-based MES Advisers, a long-time investment adviser to China's monetary authorities, who calculates lending was on a 7.9 percent growth path.
The People's Bank of China (PBOC) is on the course of gentle policy easing to cushion the world's fastest-growing major economy against stiff global headwinds as Europe's debt crisis grinds on, although it has been treading warily.
The cut, announced late evening, is set to boost the confidence of domestic stock investors, who have been eagerly awaiting clear signs of an easing of monetary policy.
"It's a very positive move for the stock market, and it will create a bullish stock market," Li Daxiao, the research head of Shenzhen-based Yingda Securities, said in an online note.
The PBOC cut big banks' reserve requirement ratio (RRR) by 50 basis points to 20.5 percent, effective from next Friday, after repeatedly defying market expectations for such a move after it first cut the ratio last November.
China's economy is likely to slow to an annual growth rate of 8.2 percent in the first quarter from 8.9 percent in the previous quarter, according to the latest Reuters poll.
Data for January came in below market expectations, with exports contracting 0.5 percent from a year earlier and money supply growth falling to 12.4 percent from the previous month's 13.6 percent, which analysts said argued for more easing.
"The growth implications of the below-normal lending in January are dire, should that lending pace be continued," said Paul Markowski, President of New York-based MES Advisers, a long-time investment adviser to China's monetary authorities, who calculates lending was on a 7.9 percent growth path.
