PBOC rate cuts pump US$78b to economy
Print Edition
To support the economy, China’s central bank announced it is implementing targeted reserve requirment ratio cuts for eligible banks beginning today.
The move will release 550 billion yuan (US$78.57 billion) worth of long-term funds, said an official at the People’s Bank of China.
The cuts target inclusive finance, and banks that meet certain criteria are eligible for 50 to 100 basis points of RRR cuts. In addition, eligible joint-stock commercial banks will receive an additional targeted RRR cut of 100 basis points to support inclusive-finance lending.
These measures will help reduce real interest rates for small, micro and private companies and bolster the real economy more directly.
The central bank will implement prudent monetary policy in a flexible and appropriate manner, while giving more attention to the recovery and development of the real economy.
The central bank will not engage in a range of strong stimulus policies and will maintain reasonably sufficient liquidity.
The increase in loans and social financing should be in line with economic development to create an appropriate monetary and financial environment for high-quality development and supply-side structural reform.
The move was within market expectations, as a State Council executive meeting last Tuesday announced more targeted RRR cut policies for inclusive finance will soon be introduced, with standards further lowered for joint-stock banks to drive down corporations’ financial costs.
This is the second time the central bank has implemented RRR cuts this year.
On January 1, the central bank announced it would cut the RRR for financial institutions by 50 basis points, releasing 800 billion yuan of long-term liquidity.
“China is at a critical period for epidemic control and economic growth, and it is necessary to strengthen counter-cyclical adjustments and maintain reasonably sufficient liquidity,” said Wen Bin, chief researcher with China Minsheng Bank.
Inclusive-finance loans benefit farmers, students, individual businesses and both small and micro businesses.
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