China could be looking to make further economic reforms with news it is set to scrap the 75 per cent loan-to-deposit ratio limit for bank lending.
This policy change from the economic giant would usher in a less-centralised and heavily regulated financial system, which would also result in the government adopting a more flexible approach to the monitoring of banks.
“China’s current loan-to-deposit ratio is already higher than mid-2009,” Lu Zhengwei, chief economist of China’s mid-sized Industrial Bank Co, was quoted by Economic Information Daily as saying.
“The ratio has crimped bank lending and forced banks to raise deposit rates while the rising capital cost will hinder any cut in lending rates.”
Indeed, there is widespread consensus among analysts that getting rid of the 75 per cent loan-to-deposit ratio as a way of observing liquidity risks would help encourage more banks to lend at affordable prices.
With China’s economy starting to slow down, such a measure would help boost domestic trade and consumption, which will interest British professionals moving overseas.
It’s a shrewd move as, although faltering economic activity around the globe is invariably having an impact on China, historically long regulatory and monetary constraints are proving to be unnecessarily restrictive.
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