After Disappointing Figures, China Will Try to Stimulate Economy China's central bank announced late Saturday that it would loosen monetary policy in a clear effort to stimulate the economy after the release on Thursday and Friday of a batch of economic indicators for April that were considerably weaker than most economists had expected. The People's Bank of China, the central bank, said on its Web site that effective on Friday it would reduce the share of deposits that banks must set aside as reserves by half of a percentage point. The reduction in the so-called reserve ratio means that banks will have more cash available to lend. China's General Administration of Customs announced Thursday that growth in imports had come to a virtual halt in April compared with a year earlier, an unexpected development in an economy that depends heavily on imported raw materials as well as imported computer chips, sophisticated factory tools and other high-end products used in its industrialization efforts. China's exports also grew half as fast as expected in April. And figures released on Friday by the National Bureau of Statistics showed that industrial production, fixed-asset investment and retail sales all increased somewhat more slowly than expected in April. Separate figures from the People's Bank showed weak growth in bank lending. The reduction in the reserve ratio, the third in the past six months, means that large banks will be required to hold reserves equal to 20 percent of deposits instead of 20.5 percent. Small and medium-sized banks will be required to hold 16.5 percent of deposits as reserves starting on Friday, down from 17 percent. The People's Bank of China announced its decision in a single sentence without providing any of the reasoning that lay behind it. China has considerable room for further reductions if its economy shows further weakness. While it is hard to compare reserve ratios across national borders because of differences in how they are calculated, by some calculations Chinese ratios are now roughly twice those found in the West. China had raised the reserve ratio six times through last July in a bid to contain inflation. Inflation peaked in July at 6.5 percent. Consumer prices now appear more under control, rising 3.4 percent in April from a year earlier - below the level of 4 percent that the government describes as unacceptable and requiring action. There is little consensus among economists on how effective further reductions in the reserve ratio will be in rekindling economic growth. Some economists, like Andy Xie, an independent economist in Shanghai, believe that bank lending has been weak this spring not because the banks are short of cash, but because many businesses see few profitable investments to make. At the same time, a steep decline in land and apartment prices, engineered by the government to improve the affordability of housing, has left many companies without enough collateral to post to qualify for loans. Ben Simpfendorfer, the managing director at Silk Road Associates, an economic consulting firm in Hong Kong, said in a telephone interview before the Chinese central bank acted that the Chinese government had many tools available, including government spending, to offset at least a temporary slowdown in growth. The bigger worry, he said, lies in a longer-term decline in China's economic growth rate The banking system continues to allocate credit mainly to state-owned enterprises and local governments instead of more efficient private enterprises, as overseas demand for Chinese exports levels off and consumer spending remains weak. "The base of growth is narrowing every day," he said. It's an economy that's running on fumes - it's running on heavy industry; it's running on infrastructure spending and some commercial property spending. The Chinese government has been uncharacteristically slow to respond to the slowdown in the economy this spring; the two previous reserve ratio reductions were announced in late November and mid-February. The delay has fostered concern among some economists that factional rivalries in China and the scandal involving the Politburo member Bo Xilai may be distracting Chinese leaders from day-to-day management of the economy. Unlike in the United States, the central bank in China is completely controlled by the country's political leaders, who make the final decisions on monetary policy.