中国央行降低存款准备金率

A month and a half into the first quarter of this year, the liquidity squeeze which has drained banks' lending power is finally starting to see signs of easing.

In January, the overall savings balance sheet has seen an 800 billion yuan loss because of the early arrival of this year's Spring Festival.

That is compared to a plunge of 780 billion Yuan over the same period last year.

As a result, most banks, especially the small-and-medium sized lenders, were left with little or no lending power.

Lian Ping, chief economist at the Bank of Communications, says the current liquidity restrictions are too tight for banks to survive, let alone those industries that count on their loans to keep production going.

"The current liquidity capacity is so tight that if it continues going this way, the economic growth we expect for this year would be unsustainable."

Many industries are expecting the precious lifeline to flow into their sector.

The housing industry,in particular, is anxious to see their end of the easing on liquidity measures.

Deng Lin is a real estate developer in Shanghai,

"I feel things are turning around now. I guess it can be read as a signal that the central bank is easing up the liquidity squeeze to prevent the housing industry from a hard-landing."

It may sound reasonable, but such argument runs counter to the government's resolve.

With the economic conference earlier this year, the central government has been continuously stressing that the property market needs to cool off.

Li Xunlei is chief economist from Haitong Securities,

"It is not likely that the central bank will lower interest rates in the short term, as the risk of inflation is still running very high. I would say that one should not expect any lowering of the cost of borrowing before the inflation rate is down to three percent."

But what is certain is that the relaxation of the liquidity standards came amid anxious anticipation and is to be followed by a string of cuts for other sources of liquidity such as the trade surplus and foreign direct investments shrink due to the sluggish overseas markets.

Optimism should be tempered however, only one day after the announcement, the Central Bank assistant governor Jin Qi, stated that,

"The pressures of slowing growth and rising inflation exist together. The monetary stance will remain prudent."

For CRI, this is Wu Jia.