China Cuts 1-Year Lending Rate; Reduces Lending Curb (Update1)

China Cuts 1-Year Lending Rate; Reduces Lending Curb (Update1)

By Li Yanping
Sept. 15 (Bloomberg) -- China cut interest rates for the first time in six years and reduced the amount of cash that some banks are required to set aside after economic growth slowed and amid tumult on Wall Street.
The People's Bank of China cut the one-year lending rate to 7.20 percent from 7.47 percent, effective tomorrow, and lowered the reserve ratio by 1 percentage point at some banks. The changes were in a statement on the central bank's Web site today.
Cooling inflation has given the central bank more room to move, while global financial turmoil adds to the risk of bigger slowdowns in China's export markets. Policy makers want to protect jobs and prevent a slump in the world's fourth-biggest economy after four quarters of slowing growth.
``This is the first tangible sign of a move to a pro-growth stance by the Chinese government,'' said Mark Tan, who helps oversee about $3 billion in Asian equities at UOB Asset Management in Singapore.
The central bank pushed the reserve requirement to a record 17.5 percent in June. The nation's largest banks were excluded from the cut. The requirement for smaller banks drops by 1 percentage point from Sept. 25. For lenders in earthquake- affected areas, the reduction is 2 percentage points.
-- With reporting by Chua Kong Ho in Shanghai. Editors: Paul Panckhurst, Michael Dwyer
To contact the reporter on this story: Li Yanping in Beijing at yli16@bloomberg.net