China’s RRR cut could lead to bank risks – Fitch

By FXStreet In a latest report published by Fitch via Reuters, the ratings agency noted that the recent RR cut by the PBOC could fuel increased lending growth by the Chinese banks, which would result in more bank risks.

Key Headlines from Fitch report:

The 50bp cut to the reserve requirement ratio (RRR) for Chinese banks on Tuesday, together with record loan growth in January, could point to an increasing likelihood that the authorities are shifting policy to enable more credit-fueled growth

Next week’s National People’s Congress meeting should provide further information on the direction of Chinese economic policy and structural reform

Fitch maintains that a return to sustained rapid lending growth by Chinese banks would be credit
negative, with leverage in the economy already high

Expects China’s credit growth will continue slowing in 2016 to 13%
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Source:: FX Street