Chinese banks still burdened by tight liquidity

Cuts in required reserve ratios are not enough to fully offset the tighter liquidity conditions, says BBVA.

According to Le Xia, senior economist at BBVA Research, intensified external uncertainties, in particular from the European sovereign debt crisis, have resulted in lower capital inflows and tighter liquidity conditions in the banking sector.

"While the central bank can continue to implement supportive measures, such as further cuts in required reserve ratios (RRR), these may not be sufficient to offset fully the tighter liquidity conditions in the banking sector."