China reduces banks' reserve requirements to spur flagging growth

China yesterday reduced reserve requirements for banks, a move that analysts say may signal government concern that the slowdown in the country's economy was deepening.

This is the first time since 2008 that China has cut the amount of money banks need to hold in reserve.

The central bank said on its website yesterday that reserve ratios would decline by 50 basis points from 5 December. According to UBS AG, the move would add 350 billion yuan to the financial system.

According to a report expected to be released today, China's manufacturing shrank for the first time since February 2009, with the country's stocks registering their biggest decline in almost four months yesterday.

Premier Wen Jiabao is keen to sustain economic expansion despite Europe's debt crisis hurting his country's exports, and small businesses being hit by a credit squeeze and home sales fallingh following a crackdown on real-estate speculation.

Meanwhile, the Purchasing Managers' Index for china was down at 49.8 for November, a level indicating a contraction, according to the median estimate in a Bloomberg News survey of 18 economists.