China will further cut reserve requirements in 2012 to pump liquidity into the country's banking system, but that will not indicate a shift in the country's monetary policy, a senior economist said Sunday.
Wu Xiaoling, a former deputy governor of the People's Bank of China, the country's central bank, said at a forum that China will use the tool of reserve requirements more frequently in macroeconomic regulation next year.
"China will cut reserve requirements to replenish liquidity if the country's yuan funds outstanding for foreign exchanges just rise slightly or even fall in 2012," Wu said.
As of the end of November, the nation's total yuan funds outstanding for foreign exchanges stood at 25.46 trillion yuan (4 trillion U.S. dollars), down 27.9 billion yuan from the figure at the end of October, central bank data showed.
Early in December, China cut reserve requirements for commercial lenders for the first time in three years. The cut dropped the reserve requirement ratio to 21 percent for large commercial banks and 17.5 percent for mid- and small-sized banks.
Wu said the steep downward revaluation of the Chinese yuan in recent days was market's normal response as the country's economy slowed and some Western speculators pulled out funds from the country to stimulate their economies.
"We don't have to be worried about the currency's depreciation," he said, adding that China should further increase its currency's flexibility next year while pushing forward interest-rate liberalization in order to "let market-based instruments play a bigger role in resource allocation."
As for China's economic growth in 2012, Wu said the country will inevitably see an economic slowdown partly due to faltering external demand, as the European Union and the United States, the country's top two trade partners, were still struggling through their sovereign debt crisis.
Meanwhile, reduced government-led investment and weak domestic demand will also be a drag on economic growth, he added.
Wu suggested the country make more efforts to boost domestic consumption to shore up growth.
China's economy slowed to 9.1 percent during the third quarter of the year, tapering off from 9.5 percent in the second quarter and 9.7 percent in the first quarter.
Related: Adjustments of China's bank required reserve ratio in 2011
1st time The People's Bank of China (PBOC), or the central bank, said on its website on Jan. 14 that it would lift the bank reserve requirement ratio by 50 basis points as of Jan. 20.
2nd time The People's Bank of China (PBOC), the central bank, announced on Feb. 18 that it would increase the bank reserve requirement ratio of 50 basis points beginning Feb. 24.
3rd time The People's Bank of China (PBOC), China's central bank, announced on March 18 to raise the bank reserve requirement ratio by 50 basis points from March 25.
4th time China's central bank announced Sunday it would raise lenders' required reserves by 50 basis points from April 21, the fourth time this year.
5th time China raises bank reserve requirement ratio by 50 basis points on May 18
6th timeChina's central bank said on Tuesday it would raise the bank's reserve requirement ratio by 50 points from June 20.