BEIJING, July 15 (Reuters) - China should cut taxes, lower companies’ borrowing costs, and reduce the amount of cash that banks must hold as reserves to lift its economy, a central bank official was quoted as saying on Tuesday.
Xu Nuojin, a deputy director at the statistics department at the central bank, was quoted by the China Securities Journal as saying that China should further lower the reserve requirement ratio, or RRR, for all banks to supplement earlier reductions.
The central bank has already lowered the RRR twice this year in April and June. But the so-called “targeted” reductions applied only to banks that lend substantially to small firms and the farm sector, in an attempt to direct loans to firms with real business needs.
The call for looser policy from Xu, who was speaking at the China 50 New Economics Delegate Forum, is among the most explicit this year from a central bank official.
It reinforces the view among analysts that China may need to further stimulate its economy if it wants to meet its 7.5 percent growth target for this year.
“The central bank has already conducted targeted RRR cuts twice which have played a positive role in guiding the market,” Xu was quoted as saying.
“But we should step up efforts to increase the policy’s strength and combine universal RRR cuts with targeted cuts to bring the RRR to a reasonable level that aligns with both the domestic and global economic situations.”
Xu said the central bank should also lower short- and long-term borrowing costs.
“The central bank must focus its attention on guiding long-term funding cost lower and must encourage long-term investment to support the real economy,” Xu was quoted as saying.
“The central bank should invest efforts in guiding the trend of money market rates lower and increase oversight of the financial market to guard against risks from the overly-complex financial products.”
China is due to release its second-quarter gross domestic product data on Wednesday and analysts expect growth to have steadied at 7.4 percent, just shy of the annual target.
But with the property market losing steam, some analysts worry that the economic slowdown may worsen and believe that more policy support is needed to boost the world’s second-biggest economy.
Xu appeared to agree.
“I insist that we should tackle the downward pressure on the economy by cutting taxes, interest rates and the reserve requirement,” he said. (Reporting by Aileen Wang and Koh Gui Qing; Editing by Ron Popeski)