On New Year’s Day the Central Bank of China announced that bank holdings would be relaxed and the Institution released $115 billion in funding for industrial enterprises.  The move by the Central Bank follows a call for support by Premier Li Keqiang.  Economists note that there is a seasonal requirement for liquidity prior to the Lunar New Year holiday commencing on January 25th.

The relaxation of bank reserves and release of liquidity probably reflects a declining economy especially affecting housing and construction.  The increased availability of funds will definitely benefit state-owned construction companies since lower rates will improve returns.

The action by the Central Bank represents a confirmation of a major complaint by the U.S. and the E.U. that quasi-government enterprises in China receive support to the detriment of companies in nations with free-market economies.