China’s central bank PBoC announced to lower reserve requirement ratio for all banks by 50bps, starting September 16. Additionally, the RRR will be lowered by further 100bps for commercial banks operating only in the provincial administrative region, to support small and micro enterprises. This additional RRR cut will be implemented by two batches on October 15 and November 15.
Together, the RRR cuts are expected to release around CNY 900B. They will increase resources of financial institutions for supporting the real economy. And, targeted RRR cut is an important measure to improve the “three-grade and two-optimal” policy framework for small and medium-sized banks to implement a low deposit reserve ratio.
PBoC also said that the RRR cut will hedge against tax period in mid-September. Total liquidity of the banking system will remain basically stable. Thus, stable monetary policy orientation has not changed.
