Date
18 October 2017
China's central bank has dampened speculation about a further relaxation in monetary policies. Photo: Bloomberg
China's central bank has dampened speculation about a further relaxation in monetary policies. Photo: Bloomberg

PBoC rebuffs talk of widened scope in reserve ratio cuts

The People’s Bank of China (PBoC) has rejected market talk that the so-called targeted reduction in the reserve requirement ratio (RRR) is being widened, Economic Information Daily reported Tuesday.

“The coverage for targeted RRR cut has not been expanded,” the central bank said on its official micoblog late Monday, dampening speculation that monetary policy will be eased further, the paper noted.

All commercial banks that meet the requirements of exposure to agriculture-related projects or small companies and prudent operations are covered by the targeted RRR reduction program. The list includes state-owned commercial banks, joint-stock commercial lenders, city commercial banks as well as rural commercial banks, indicating a consistent policy of the central bank.

The PBoC’s comments came in the wake of news Monday that four joint-stock commercial banks — China Minsheng Bank, China Merchants Bank, Industrial Bank, and Bank of Ningbo — have been approved 50 basis point cuts in their reserve ratios, in a move that could release a combined 37 billion yuan into the financial system.

The move surprised the market, although the central bank had said joint-stock banks had not been excluded for the targeted RRR cut from the very beginning.

Xie Yaxuan, a senior researcher with China Merchants Securities, was quoted as saying that the central bank has aimed to manage market expectations while reaffirming its stance of maintaining a prudent monetary policy.

Yang Chi, a researcher with Huaxia Bank, said the PBoC’s move aims to dampen expectations that monetary policy will be eased sharply. The possibility of one-off and bold policy easing measures are rather low.

However, Xu Nuojin, deputy director general of the central bank’s statistics department, has said recently that Beijing may need to consider cutting RRR and interest rates to boost the economy if there is a deflation threat.

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