China announces bank reserve ratio cut to shore up slowing economy

China's central bank said Wednesday it will cut the amount of cash that banks must hold as reserves from Feb. 5 as a monetary easing measure to shore up the slowing economy amid a property sector crisis.

Pan Gongsheng, governor of the People's Bank of China, said at a press conference that the reserve requirement ratio will be lowered by 0.5 percentage point to pump about 1 trillion yuan ($140 billion) of liquidity into the economy. After the cut, the average reserve requirement ratio for financial institutions will be 7.0 percent.

It will be the first ratio cut this year following the 0.25-point reduction in September. The step is expected to boost consumption and domestic investment by prompting financial institutions to lend more money to companies and other entities.

The world's second-biggest economy has been slowing, with its real estate sector continuing to be affected by problems that saw major developers China Evergrande Group and Country Garden Holdings Co. saddled with heavy debts.

The property market accounts for some 30 percent of China's gross domestic product. The country also faces other economic challenges, such as high youth unemployment, subdued external demand and mounting local government debts.

© Kyodo News