The People’s Bank of China (PBoC) announced on the 17th that it would cut its reserve ratio by 25 basis points.
Tthe People’s Bank of China (PBoC) announced that it will lower the reserve requirement rate for the first time this year from the 27th to support the recovery by releasing liquidity and promoting loan expansion.
The reduction in the reserve ratio will be applied to all commercial banks except small local banks by about 5%. Lowering the stake ratio will reduce the deposit of the People’s Bank of China, increasing the room to turn it into loans.
In the meantime, there have been observations in the market that the People’s Bank of China is lowering the reserve ratio to stimulate the economy, but it was carried out earlier than expected.
The economist pointed out that “policy officials rushed to cut the reserve ratio in hopes of maintaining the economic trend.”
Regarding the cut in the reserve ratio, the People’s Bank of China explained, “It was made with the intention of improving the level of financial services for the real economy and maintaining liquidity in the banking system at an appropriate level.”
With this measure, the reserve ratio of commercial banks was around 7.6% on a weighted average.
China’s economy is steadily recovering after the strict zero-corona policy was lifted in December last year, but it has shown variations by sector.
Service-related consumption, such as eating out and traveling, has been steadily normalized, while sales of durable consumer goods, including cars and smartphones, have been slow to recover.
Employment growth has also slowed, leaving anxiety in the good deeds of companies and households.
In response, Xi Jinping’s leadership expressed a plan to strengthen economic stimulus.
The People’s Bank of China (PBoC) lowered its reserve requirement rate by 0.25 percentage points in December last year.
