Let banking tools aid small businesses

A woman walks past the headquarters of the People's Bank of China (PBOC), the central bank, in Beijing, in this file picture taken June 21, 2013. [Photo/Agencies]

The People's Bank of China on Wednesday announced it was reducing the reserve requirement ratio by 0.5 percentage points for financial institutions, with additional measures for special policy banks, in order to support their ability to adjust their structure. Comments:

Traditionally, demand for credit grows sharply in January because people and enterprises need cash to repay their debts before the Lunar New Year; the repo rate usually rises above 4 percent at this time of the year. To lower the RRR is only an ordinary measure of the central bank for this special month.

China Securities newspaper, Feb 5

With the People's Bank of China having basically stayed away from everyday intervention in the foreign currency market, China's funds outstanding for foreign exchange have decreased. Therefore lowering the RRR is a necessary measure for the central bank to release funds to the society.

Ma Jun, chief economist at PBoC Research Bureau, Feb 5

Only frequent adjustments of interest rates and the RRR amount to fundamental changes in monetary policy. Currently the central bank is only adjusting RRR by a small ratio, which is obviously not the case. China's monetary policy remains steady, and strong stimulus is not an option.

Lian Ping, chief economist at Bank of Communications, Feb 5

China wants a more balanced economy that relies on producing high-end goods, services and consumer spending. Right now China has too many cement, steel and glass factories and not enough accountants and lawyers, family vacationers or Alibabas. So the central bank has learned to be more subtle. In recent years it has stopped lowering interest rates or reserve requirements for the broader economy. Instead it has started making more targeted moves it hopes will benefit small businesses, farmers and others who aren't always well-served by China's big State-run banks.

wsj.com, Feb 4