PBOC Reduces Reserve Ratio Requirement by 1 Percentage Point

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The Chinese central bank will reduce the reserve requirement for a range of lenders by 1 percentage point starting from 25 April.

The People’s Bank of China has announced that the reduction will affect the RMB reserves of large-scale commercial banks, joint-stock banks, municipal commercial banks, non-county village commercial banks and foreign-invested banks

According to PBOC the move is intended to “guide financial institutions to expand the vigour of their support for micro-enterprises, increase stability of capital within the banking system and optimise the liquidity structure.”

PBOC also wants capital freed up by the reserve ratio reduction to be used by lenders to repay the medium-term lending facilities (MLF) borrowed from it by commercial banks as part of open market operations.

PBOC said that it will “continue to implement stable and neutral monetary policy, maintain a rational level of liquidity, guide steady and moderate growth in money, lending and total social financing, and create an appropriate monetary and financial environment for high-quality growth and supply-side structural reforms.”

 

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