China cuts reserve requirement ratio to boost economy, releasing US$83.2 billion into banking system

INA-  sources 

China’s central bank on Friday announced a much-anticipated cut of its reserve requirement ratio (RRR), or the amount of cash that banks must hold in reserve, to shore up its slowing economy amid growing headwinds. Though the 0.25 percentage point reduction was below market expectations, the People’s Bank of China (PBOC) said following the decision that the current level of liquidity is sufficient and the move is aimed at helping sectors hit by the coronavirus pandemic.

The world’s second largest economy faces mounting challenges as an Omicron outbreak plagues more than 70 cities nationwide and lockdowns in commercial and financial hubs disrupt economic activities. Companies are also grappling with spikes in global commodities prices fueled by Russia’s invasion of Ukraine, while foreign investors are pulling their money out of Chinese capital markets following a new rate hike cycle by the US Federal Reserve.

Friday’s decision marks the third reserve cut in the current easing cycle, following 50 percentage points cuts in July and December last year.

Small commercial banks and selected rural lenders will benefit from a further reduction of 0.25 percentage points, the PBOC said, as authorities try to help under-pressure small and micro businesses.