China’s Central Bank to cut reserve requirement ratio
BEIJING: China’s central bank announced yesterday it would reduce the reserve requirement ratio (RRR) for most banks by one percentage point, the fourth time this year the country has sought to free up credit for businesses as they face down US$250 billion in US tariffs.
The move to cut the amount of cash which most commercial and foreign banks must hold in reserve, to repay loans obtained via the central bank’s mediumterm lending facility, will take effect on October 15.
The decision is intended to “further encourage the stable development of the real economy, optimise the liquidity structure of commercial banks and financial markets, lower financing costs, and to continue increasing the financial systems’ efforts to support small businesses, private enterprise and innovation,” the People’s Bank of China (PBOC) said in a statement.
The move will be used to pay down 450 billion yuan (US$65.6 billion) of medium-term lending facilities, it said, adding that it could also free up another 750 billion yuan in funds.
The move is not expected to put depreciatory pressure on the yuan, the statement said, adding that the bank would continue to maintain a “prudent and neutral” monetary policy.
It is the fourth such move this year, as China seeks to blunt the economic impact US President Donald Trump’s imposition of US$250 billion dollars of Chinese goods, roughly half of country’s exports to the US.