CHINA’S central bank announced yesterday to cut the amount of cash that banks must hold as reserves, the first industry-wide cut in more than 2-1/2 years, as it increased efforts to shore up flagging growth in the world’s second-largest economy.

    The move, which came less than three months after China also cut interest rates for the first time in over two years, was widely expected by investors, who had bet that monetary policies had to be further loosened to lift economic growth from a 24-year low.

    The reserve requirement ratio, or RRR, would be lowered by 50 basis points, the People’s Bank of China (PBOC) said in a statement on its website. The cut is effective from today and will take the RRR for big banks to 19.5 percent.

    Underscoring the Chinese Government’s concerns about slackening economic growth, the central bank said the RRR would be lowered by an additional 50 basis points for urban and rural commercial banks that lend to small- and medium-sized companies.

    The reserve ratio for China Agricultural Development Bank, a bank that lends at the behest of the government to support its policies, would be lowered by an additional 400 basis points, the central bank said.

    Some analysts said the latest policy easing may have been triggered by an official survey of China’s mammoth factory sector that showed it shrank unexpectedly for the first time in nearly 2-1/2 years in January.

    China cut the RRR for some banks earlier this year, but this was the first broad-based change in the ratio since a 50- basis-point cut in May 2012.

    It came after the central bank announced a surprise cut in benchmark interest rates in November after a run of data showing the economy losing momentum.

    China’s economic growth slowed to 7.4 percent in 2014 — the weakest in 24 years — from 7.7 percent in 2013.

    The economy faces formidable headwinds into 2015 as a property downturn persists, while companies will continue to struggle to pay off debt and export demand may remain erratic.(SD-Agencies)