Date
21 July 2017
China's central bank has stepped up efforts to boost liquidity and shore up the economy. Photo: Bloomberg
China's central bank has stepped up efforts to boost liquidity and shore up the economy. Photo: Bloomberg

China makes deep cut in bank reserve requirement

China’s central bank on Sunday announced a 100-basis-points cut in the reserve requirement ratio (RRR) for commercial lenders, stepping up efforts to boost liquidity and combat the economic slowdown.

Effective Monday, the RRR — or the amount of cash that banks will be required to hold as reserve — will be lowered to 18.5 percent, according to a statement from the People’s Bank of China (PBoC).

It marked the second cut in the reserve ratio in two months and came just days after data showed the nation’s GDP growth slowed to 7 percent in the first quarter, the weakest pace in six years.

The bigger-than-usual reduction in the RRR is expected to free up at least a trillion yuan in new funds that banks can lend, Reuters quoted an analyst as saying.

The central bank also announced targeted RRR cuts — an additional 100 bps cut for rural credit cooperatives and village banks, as well as a 200 basis point cut for the China Agricultural Development Bank, one of China’s major policy lenders, the report said.

The PBoC last cut the RRR for all commercial banks by 50 basis points on Feb. 4, the first industry-wide cut since May 2012.

The central bank has also cut interest rates twice since November in a bid to lower borrowing costs and spur demand.

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