China Unveils Another Targeted Reserve Cut, Set to Inject USD$56.38 Billion

The Chinese central bank has announced another targeted cut to the required reserve ratio (RRR) as part of efforts to keep the economy ticking in the wake of the COVID-19 outbreak.

The People’s Bank of China (PBOC) announced via its official website that it would cut the RRR for smaller banks by 100 basis points, via two cuts of equal size on 15 April and 15 May.

The move will reduce the RRR for China’s roughly 4000 small and medium-sized banks to 6%, unleashing as much as 400 billion yuan (approx. USD$56.38 billion) in liquidity.

A reg­u­lar meet­ing of the State Coun­cil held on 31 March previously con­firmed that it would “fur­ther strengthen fi­nan­cial in­clu­sion sup­port mea­sures for mi­cro, small and medium en­ter­prises,” with mea­sures in­clud­ing another tar­geted re­quired re­serve ra­tio (RRR) cuts for small and medium-sized banks.

PBOC has also announced that it will reduce the interest rate on the excess reserves of financial institutions that are held with it to 0.35% from 0.72% on 7 April.

On 16 March China im­ple­mented a tar­geted RRR cut of 0.5 to one per­cent­age points for banks that sat­is­fied re­quire­ments, while qual­i­fied joint-stock banks also en­joyed an ad­di­tional tar­geted re­duc­tion of one per­cent­age point to sup­port the is­suance of fi­nan­cial in­clu­sion loans. 

The latest RRR cut scheduled for April and May will be the third this year, as well as the 10th since early 2018.

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