China’s reduction in reserve requirements for banks, the first since 2008, may signal government concern that a slowdown in the world’s second-biggest economy is deepening.
Reserve ratios will decline by 50 basis points effective Dec. 5, the central bank said on its website yesterday. The move may add 350 billion yuan ($55 billion) to the financial system, according to UBS AG.
A report due today may show that China’s manufacturing contracted for the first time since February 2009, and the nation’s stocks had their biggest decline in almost four months yesterday. Premier Wen Jiabao aims to sustain the economic expansion as Europe’s debt crisis saps exports, a credit squeeze hits small businesses and a crackdown on real-estate speculation sends home sales sliding.
“The deceleration of growth may have become faster than expected on increased external uncertainty, a sagging property market” and difficulties for smaller companies, said Liu Li- gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd. who previously worked for the World Bank. The manufacturing report may be “worse than expected,” Liu said.
The Purchasing Managers’ Index may dip to 49.8 for November, a level marking a contraction, according to the median estimate in a Bloomberg News survey of 18 economists. That data is due at 9 a.m. local time today. Consumer price gains eased to 5.5 percent in October, compared with a government target of 4 percent, as exports rose the least in almost two years.