STORY HIGHLIGHTS


China to cut RRR by 50 basis points

CNC
Added On January 3, 2020

 The People's Bank of China, or PBOC, China's central bank, has decided to cut the reserve requirement ratio for financial institutions by 50 basis points from Jan. 6 to spur the real economy.

 
Economy Report has the details.
 
The move will cut the cash that lenders must hold as reserves, releasing about 800 billion yuan, or about 114.6 billion U.S. dollars, of long-term liquidity to bolster the economy and reduce social financing costs.
 
An official with the PBOC said the reduction will offset the impact of strong cash demand ahead of the Spring Festival to keep overall liquidity in the banking system basically stable, denying "flood-like" stimulus.
 
The official stressed that the stance of prudent monetary policy has not changed.
 
The central bank urged financial institutions to effectively use the additional funds to increase support for small, micro and private businesses.
 
According to the central bank, more than 120 billion yuan or about 17.2 billion U.S. dollars in long-term funds is expected to be unlocked for small and medium-sized lenders, which will build up their capacities to support the targeted enterprises.
 
Meanwhile, the move will slash banks' capital costs by 15 billion yuan or around 2.1 billion U.S. dollars per year, which would help reduce the real cost of social financing.
 
The New Year move came as the Chinese economy ended 2019 on stable footing despite domestic headwinds and external uncertainties, but downward pressures still loom large.