State Council Flags RRR Cut Targeting Joint Stock Banks to Help Deal with Coronavirus Impacts

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The State Council has flagged the use of targeted cuts to China’s reserve requirement ratio (RRR) to help prime the Chinese economy in the wake of the coronavirus outbreak.

A meeting of the State Council convened by Premier Li Keqiang on 10 March called for “unveiling financial inclusion targeted reserve ratio reduction measures, and extra expansions to the vigour of reserve reductions for joint-stock banks.”

Wen Bin (温彬), chief researcher with China Minsheng Bank, said the emphasis on joint-stock banks was due to their relative flexibility, and ability to better serve smaller enterprises.

Wen said that China still has room for further cuts, given that at present the average RRR for Chinese financial institutions is 9.9%, standing at 12.5% for large-scale banks, 10.5% for medium-sized banks and 7% for small-scale banks.

The State Council called for “driving for commercial banks to expand support for micro and small enterprises and individual industrial and commercial registrations; aiding the resumption of work and production and driving reductions to financing costs.”

Other measures stressed by the State Council included:

  • Better employing the role of re-lending and re-discount policies, after relevant Chinese authorities guided financial institutions in the implementation of 300 billion yuan in special re-loans and 500 billion hyun in re-loan re-discounts.
  • Persisting with the expansion of external opening, and adopting multiple measures to stabilise foreign investment and foreign trade.

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