Chinese Central Bank Expected to Reduce Reserve Ratio by End of Q1

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Domestic observers expect the People’s Bank of China (PBOC) to further cut the reserve ratio by the end of the first quarter, after it made sizeable net injections via open market operations

PBOC has recently stepped up its injections into the banking system via open market operations. On 28 March it made net injections of 120 billion yuan via 150 billion yuan in reverse repo operations, for the purpose of “maintaining stable liquidity at the end of the quarter.”

Li Chao (李超), chief-economist with Zheshang Securities, told Securities Daily that he expects a cut to the reserve ratio from PBOC in the near-term, with the goal of loosening credit and stabilising growth.

Wen Bin (温彬), chief researcher with China Minsheng Bank says reserve cuts and interest rate cuts are “still necessary” for expediting “economic operation within a rational range,” while Ming Ming (明明) from CITIC Securities sees the possibility of a near-term reserve ratio reduction.