Thu, Dec 01, 2011 - Page 12 News List

Eurozone worries spur action by China and Taiwan

By Amy Su  /  Staff Reporter

China’s central bank yesterday said it would cut the reserve requirement ratio to curb surging inflation and property prices, and Taiwan is scheduled to unveil new economic stimulus measures today, indications that the eurozone’s debt crisis has threatened the countries’ economic outlook.

China’s reserve ratios will decline by 50 basis points on Monday, the People’s Bank of China said in a statement on its Web site yesterday. Before the announcement, the level was a record 21.5 percent for the biggest lenders, based on the bank’s previous statements.

It was the first time since 2008 that China has cut the amount of cash banks must set aside as reserves, data showed.

Previously, China’s central bank allowed reserve ratios to fall by half a percentage point for more than 20 rural credit cooperatives. Those lenders had been subject to elevated requirements for a year as a penalty for failing to meet lending targets.

“China’s decision marks a reversal of direction [of its monetary policy],” Council for Economic Planning and Development Minister Christina Liu (劉憶如) said yesterday.

China’s monetary easing came after Bank Indonesia cut its benchmark interest rate to a record-low 6 percent on Nov. 10 and Thailand’s central bank yesterday cut interest rates for the first time in two years, lowering the official rate by 0.25 percentage points to 3.25 percent, to boost their economies.

Liu said China’s move indicated the world had turned its focus to “maintaining growth.”

Most of the Asian countries, including China, adopted monetary easing measure during the 2008 global financial crisis to maintain economic growth momentum.

However, compared with the US and European countries, Liu said Asian economies stopped cutting interest rates much earlier, indicating that they might again use monetary easing to boost economic growth.

Liu did not specify whether Taiwan’s central bank would cut interest rates as well. However, she said the government is scheduled to release new economic stimulus measures today in response to the rising uncertainties about the eurozone’s debt crisis.

The measures will be a set of solutions applicable for the short term as well as the middle to long term, focusing more on specific industries that stand to lose more orders from the US and Europe, Liu said.

“The [stimulus] package will enhance long-term competitiveness for the nation,” she said.

However, the new stimulus measures will not be as large as those initiated after the global financial crisis in 2008, she added.

Additional reporting by AFP and Bloomberg

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