The People’s Bank of China announced to lower the reserve requirement ratios (RRR) by 100 basis points to “support the development of the real economy, optimize the liquidity structure, and reduce financing costs”. The RRR will be lowered by 0.5% on January 15 and another 0.5% on January 25. Currently, the RRR stands at 1.4% for large banks and 12.5% for smaller banks. Additionally the Medium Term Lending Facility will not be renewed after expiry in Q1.
In the statement, PBoC pledged to “continue to implement a prudent monetary policy, maintain a moderate degree of tightness, not engage in flooding, reorientation and regulation, maintain a reasonable and sufficient liquidity, maintain a reasonable growth in the scale of money and credit and social financing, stabilize macro leverage, and balance internal and external balances.
