Economics Essay Example | Topics and Well Written Essays - 1500 words - 40

Economics - Essay ExampleThat makes lending conditions more difficult, especially at smaller banks. The March loan-to-deposit ratio of 83 per centfor Chinas small and midsize banks was already above the 75 per centlimit set by the regulator.In aggregate, though, it isnt clear the banks atomic number 18 short of funds to lend. The level of reserves banks hold above the requirement held steady at 2.2 percentage points in March, up from 0.8 points in the middle of 2011. The seven-day interbank lending rate was 3.2 per centFriday, down from an average of 4 per centin 2011. Both measures suggest that liquidity conditions are improving.With no shortage of funds in the banking system, but new loans low, the obvious conclusion is that it is constrained demand for loans, not a constrained supply of credit, that is the problem. The shrinking share of long-term loans in the bring for new lending - down to 28per centin April from an average of 51 per centin 2011 - suggests businesses dont se e so many opportunities for profitable investment.In the past, demand for loans was always strong. Increasing supply by lowering the reserve-requirement ratio was a sure-fire way to give growth a boost. If demand is without delay less assured, opening the lending taps may no longer provide a quick