For The First Time In 2023 China Cuts Banks’ Reserve Ratio To Boost Growth

CFP


China’s central bank said on Friday (March 17) it would cut the amount of cash that banks must hold as reserves for the first time this year to help keep liquidity ample and support a nascent economic recovery.

Chinese leaders have pledged to step up support for the world’s second-largest economy, which is gradually rebounding from a pandemic-induced slump after virus curbs were abruptly lifted in December.

The People’s Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points (bps), effective March 27.
The central bank said the cut reflected its intention to “make a good combination of macro policies, improve the level of services for the real economy, and keep liquidity reasonably sufficient in the banking system.”

The central bank has promised to make its policy “precise and forceful” this year to support the economy, keeping liquidity reasonably ample and lowering funding costs for businesses.

The reduction follows a 25-bps cut for all banks in December.

The weighted average RRR for financial institutions stood at around 7.6% after the cut, the central bank said.

China’s economic activity picked up in the first two months of 2023 as consumption and infrastructure investment drove a recovery from pandemic disruptions, but exports remain weak amid a global downturn and the crisis-hit property sector is only slowly beginning to stabilise. – Reuters

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