The Chinese government last month cut the reserve ratio for commercial lenders, allowing them to offer more loans to small businesses in China. The move is seen as an effort to stem a possible downturn in the country’s economy that may be impacted by the flailing European and stagnant American economies.

“It’s a surprising move,” said Shi Chenyu, an economist with the Industrial and Commercial Bank of China. The market was not expecting the central bank to cut the reserve ratio so fast. The move sends a clear message that the central bank is ready to relax its policy stance.”

The Chinese banks have not been as liquid lately after the central bank widened the ratio required between deposits and loans. It was the first time in three years the government has acted to cut the percentage.

Analysts had been concerned that the Chinese economy was slowing, as growth declined to 9.1 percent in the third quarter, its weakest performance since the second quarter of 2009.

It’s good news for the Macau gaming industry, according to Sterne Agee analyst David Bain.

“We view China’s lowering of the reserve requirement ratio as positive for Macau names, especially given investor concerns for promoter/ junket liquidity,” he wrote in a note to investors.

Macau-based Union Gaming Group said the cut may not impact the casinos as much as analysts might believe.

“As the People’s Bank of China began its tightening measures in December 2008, conventional wisdom suggested that Macau revenues could be negatively impacted as liquidity was being systematically taken out of the market,” the company wrote in a report. “However, this did not appear to be the case as Macau gaming revenues grew between 2009 and 2011… With this in mind, we suspect that this reversal in policy could have a greater impact on sentiment than on market forces.”

Union says the cut should have a larger impact with companies that depend more on the VIP market, starting with Galaxy (90 percent), Wynn Macau (77.55 percent), MPEL (78.6 percent), SJM (70.1 percent), Sands China (56.3 percent) and MGM China (50 percent).

By GGB Staff

Staff writers for Global Gaming Business magazine. Las Vegas, Nevada.