China central bank cuts some banks’ requirement
BEIJING: China’s central bank said it would cut the amount of cash that some banks must hold as reserves by 50 basis points (bps) in a move designed to stimulate lending to smaller businesses in needs of funds.
The reserve cut, the third by the central bank this year, had been widely anticipated by investors amid concerns over market liquidity and a potential economic drag from trade disputes with the United States.
The targeted cut in some banks’ reserve requirement ratios (RRRs) – currently 16% for large banks and 14% for smaller banks – will take effect on July 5, the People’s Bank of China (PBoC) said in an online statement.
The central bank said targeted RRR cuts would release about 500 billion yuan (US$77bil) for the country’s five large state banks and 12 national joint-stock commercial banks.
The lenders are encouraged to use the money to conduct debt-for-equity swaps, it said.
RRR cuts would also release about 200 billion yuan in funding for mid-sized and small banks to increase lending to credit-strapped small businesses, the PBoC said.
The central bank said it would maintain neutral and prudent monetary policy as it sought to cultivate an appropriate monetary and financial environment for China’s economic growth and supply-side structural reforms.
Chinese policymakers have said that the country would use targeted RRR cuts to boost financing to struggling smaller firms, as well as other measures.