Debate swirls on reserve ratio requirement

There's a wide range of views on the issue now.

Green wrote in a report on May 21 that while deleveraging cannot be achieved with super-loose monetary policy, it also cannot be attained with high real interest rates and low nominal GDP growth.

"We believe the time is coming when a RRR cut and broader-based easing will be needed to stabilize growth," he wrote. "You cannot deleverage an economy that is not growing."

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And growth is definitely slowing. The economy expanded at its slowest pace in 18 months in the first quarter. The 7.4 percent rate was below the 7.5 percent full-year target mentioned by Premier Li Keqiang.

Things didn't improve much in April. SouFun Holdings Ltd, which operates a property portal, said housing prices declined month-on-month in 45 of 100 cities, up from 37 cities in March. Its sample of 25 major cities showed a sales plunge of 17.8 percent year-on-year in April.

On the macroeconomic front, the consumer price index was up 1.8 percent year-on-year in April, down from 2.4 percent in March. The producer price index fell 2 percent in April.

The HSBC Flash China Manufacturing Purchasing Managers Index recovered to 49.7 in May from April's final reading of 48.1, beating a Reuters poll forecast of 48.1. But it remained below the level of 50, which separates growth from contraction, indicating that manufacturers experienced a slight drop in business.

Shen Jianguang, chief economist with Mizuho Securities Co Ltd, said via microblog on Monday that a reserve ratio cut would be the best macroeconomic means to avoid a hard landing.

Lu Zhengwei, chief economist at Industrial Bank Co Ltd, said much the same thing via Weibo, stating that a reserve ratio cut would help lower medium-to long-term funding costs, which would boost growth.