Source: Wall Street Journal

China cut bank-reserve requirements for the first time in nearly three years, suggesting leaders of the world's second-largest economy see a rising threat from slow global growth. The move is likely a surprise to economists who expected China to embrace what's known as the reserve requirement ration by the end of the year. China's growth remains integral to Mongolia's own because China is Mongolia's number one consumer of coal and base metals.

The People's Bank of China said it will cut the reserve-requirement ration for banks by half a percentage point, the first such cut since December 2008. The cut essentially frees up banks to lend additional money. The move suggests the government's policy focus is shifting toward promoting economic growth from controlling inflation, said HSBC China economist Ma Xiaoping. China so far has been focused on fighting inflation, tightening constraints on the economy while still continuing to seek steady growth; a scenario that economists call a soft landing. However, some experts are pessimistic about Beijing's ability to pull off a soft landing amid Europe's continued debt crisis and soft global economic growth.

“The data for the last few weeks has been bad,” said Mark Williams, China economist at Capital Economics. “There's growth in property starts, electricity output growth has slowed, the export numbers for November will be awful and they may have had a sneak preview of that. All of these things could have triggered a shift in policy.”

There will likely be more such reserve ratio cuts, with one more cut of 0.5 percent coming at soon as the beginning of next year. However, another economist said it isn't likely that the bank will cut interest rates in the next six months.

Although China's top leaders have hinted that policy will be fine-tuned to support growth, many China watchers have said the country would be slow in easing credit access as it still is dealing with the negative effects from a massive stimulus package Beijing unleashed after the 2008 global financial crisis. Recently, however, inflation has eased while economic growth has continued to slow due to tight credit at home and slumping demand overseas. In recent months capital flows into China have slowed amid worries over the global economy, China's slowing growth, and reduced expectations for the yuan. In October, China recorded its first monthly outflow of foreign currency since 2007.