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BEIJING (Nov 24): China could cut reserve requirements for all banks in the first three months of 2012, a senior Chinese banker said, adding to talk that a fast-cooling world economy may lead Beijing to relax monetary policy.
The People's Bank of China has not taken any substantive monetary tightening measures since mid-July for fear of crimping economic growth at a time when Europe's debt crisis is hurting exports.
"There is the possibility of a cut in the reserve requirement ratio in the first quarter, and the tone of macro policy will change during the central economic work conference," said Huang Jifa, deputy head of investment banking at Industrial and Commercial Bank of China Ltd (ICBC) .
ICBC is the world's biggest bank by market value.
The central economic work conference is an annual year-end meeting of top Chinese policymakers at which the following year's economic policy plans and targets are decided. It is expected to be held in coming weeks.
"If policy remains as tight as before, some problems will emerge, including in the property sector," Huang told reporters on the sidelines of a debt conference in Beijing on Thursday.
The reserve requirement ratio for the country's biggest banks is at a record high of 21.5%. Banks have said the unduly steep ratio hurts profits by restraining their ability to lend.
Some investors had speculated that a recent downward revision in reserve requirements for several rural banks was part of China's broad campaign to relax monetary policy in some quarters of the economy. The central bank denied this.
Huang, previously in charge of ICBC's lending to small and medium-sized companies in the eastern province of Zhejiang, said companies may still face credit tightness next year even if Beijing relaxed policy.
He said only 15%-20% of small companies could borrow from banks and their financing woes could not be easily addressed.
Liang Hong, treasury head at mid-sized lender Industrial Bank Co Ltd, agreed.
"Will we face the kind of liquidity crunch next year as seen in the second and third quarters of this year? That possibility cannot be excluded," he said, adding that more small companies and local governments may issue debt next year.
China has allowed a handful of provinces to sell debt on their own to work through a pile of outstanding debt at local governments — totalling 10.7 trillion yuan (RM5.36 trillion) at the end of 2010 — that some fear could endanger the banking sector.
Huang dismissed concerns about Beijing's fiscal health, saying the government owned many large and profitable state companies, and that revenue collected was rising by about a third per year.
But he was less sanguine on the slowing property market, where prices fell for the first time this year in October.
"If China's property prices drop by 30%-40%, it will bring even more serious problems than excessive home price rises," Huang said, adding that steep price falls would erode government land reserves and weigh on the broader economy. — Reuters
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