China May Ease Bank Reserve Requirements

After nearly a year of stepping on the brake to slow its over-heating economy, China appears to be on the brink of tapping the accelerator once again. The country’s economy grew at its slowest pace in two-and-a-half years in the fourth quarter of 2011 (a mere 8.9%), and now the country’s government wants to ease up on bank capital and lending requirements.

It’s difficult to figure out what to make of this, other than that China’s managed capitalism is a lot more about central management than it is about capitalism.

If the Chinese do lower capital reserve requirements, that will make more capital available to lend and will certainly lift demand for construction again. That will raise demand for steel and other raw materials and commodities, including crude oil.