CHINA cut the amount of cash that banks must set aside as reserves for the second time in three months to spur lending as Europe’s debt crisis and a cooling property market threaten economic growth.

    Reserve requirements would fall by 50 basis points from Friday, the People’s Bank of China said Saturday. At present, the ratio for the nation’s biggest lenders stands at 21 percent.

    Premier Wen Jiabao aims to steer the world’s second-biggest economy through a property market slowdown and the weakest export growth since 2009, with the Commerce Ministry last week calling the trade outlook “grim.” The International Monetary Fund said this month that China’s expansion may be almost halved if Europe’s debt crisis worsened.

    A 50 basis-point cut in reserve ratios adds 400 billion yuan (US$63 billion) to the financial system, according to estimates. The previous reduction in December was the first since the global financial crisis.

    The central bank said Wednesday that it would improve the use of differentiated reserve ratios, where individual lenders hold different percentages of deposits as reserves according to their capital adequacy levels and lending growth.

    The bank also said that M2, the broadest measure of money supply, would probably grow 14 percent this year.

    China’s exports and imports fell for the first time in two years last month and new lending was the lowest for January in five years.

    China’s economy grew 8.9 percent in the fourth quarter from a year earlier, the slowest pace since the first half of 2009.

    (SD-Agencies)