China is acting to prevent a slowdown in the world's second largest economy from getting out of hand.

The country's banks have been told they can keep less cash in reserve, a move the central bank hopes will encourage them to lend more to stimulate activity.



China’s overall debt load has risen quickly since the global financial crisis. While still manageable, it raises some concerns for investors, the McKinsey Global Institute says in a new report.

The prospect of a major economic slowdown in China is among the key concerns for policy makers and investors in a turbulent global outlook. Many believe the Chinese government has the resources to manage a smooth transition to a slower growth rate without causing a financial crisis.

But the speed of Chinese debt growth, much of it related to real estate, raises risks that an unwinding of the country’s two-decade growth boom might not go down so smoothly.

Here are some key facts from the report.


Total Debt Equals 282% of GDP: That’s how big China’s total debt load, including borrowing by the government, banks, corporations and households, had gotten by the middle of 2014, the report says. That’s far above the average for developing countries and higher than some advanced economies including Australia, the United States, Germany and Canada.

Data releases since then have pointed to a further loss of momentum -- the latest official survey of activity in China's huge manufacturing industry showed prices and production falling.
And the rate of growth across manufacturing and services was the weakest in eight months in January, according to an HSBC survey.
"Given continued contraction of the manufacturing sector, we believe more easing measures are warranted to support growth in the coming months," wrote HSBC's chief China economist Hongbin Qu.ng

Wednesday's 0.5% cut in the ratio of reserves Chinese banks are required to hold was widely expected following last November's cut in key interest rates, and China's oft stated commitment that it will prevent the economy suffering a hard landing.

Capital Economics said the move was roughly equivalent to an injection of about $100 billion but that smaller banks would struggle to pass much of that on to borrowers because of other barriers to lending.


China is expected to announce its official growth target for 2015 next month. Several analysts expect Chinese GDP to grow by less than 7% this year due to weakness in real estate and infrastructure investment.

http://blogs.wsj.com/economics/2015/...conomic-risks/

http://money.cnn.com/2015/02/04/news...nomy-stimulus/