In a follow-up to Governor Pan Gongsheng’s earlier remarks this week, the People’s Bank of China announced today a 50bps cut in the reserve requirement ratio and a 20bps reduction in the seven-day reverse repurchase rate.
This move is intended to release approximately CNY 1T in long-term liquidity, enabling banks to lend more and increase purchases of government bonds aimed at funding infrastructure projects. With the cut, the weighted average RRR will drop to around 6.6%. The central bank also lowered the seven-day reverse repo rate from 1.7% to 1.5%.
Further fiscal measures are anticipated before China’s National Day holiday on October 1, as the Politburo has signaled a heightened focus on addressing economic pressures.
Reports indicate that the government will raise CNY 1T via special bonds, which will fund consumer goods subsidies, upgrades to business equipment, and provide a monthly allowance of CNY 800 yuan per child for households with multiple children. Additionally, another CNY 1T in special sovereign debt could be issued to help local governments manage their mounting debt burdens.
