Chinese Central Bank Cuts Required Reserve Ratio to Support Economy

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The People’s Bank of China (PBOC) has announced a further reduction in the required reserve ratio in a bid to reduce financing costs and drive growth, as escalating trade tensions with the US cast a pall upon economic growth.

The Chinese central bank announced on Sunday that the required reserve ratio would be reduced by 100 basis points starting from 15 October, in a move that is set to add another 1.2 trillion yuan in liquidity to the banking system.

The cut will result in a net injection of 750 billion yuan (USD$109.2 billion), given that it coincides with the maturation of 450 billion yuan in medium-term lending facilities (MLF).

The required reserve ratio currently stands at 15.5% for large-scale banking sector financial institutions, and 13.5% for smaller institutions.

The cut is the fourth implemented by PBOC since the start of 2018, with Beijing also unveiling heightened stimulus measures in the second half as part of efforts to support the Chinese economy.

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