China’s PBoC announced yesterday to cut the reserve requirement ratio (RRR) by 50bps to 12.5%, effective January 6. That’s the eight cuts since early 2018, for releasing more funds for lenders to support the slowing economy. The reduction is expected to release around CNY 800B (USD 115B) of long term liquidity. Also, the move would offset cash demand ahead of Lunar New Year, keeping the liquidity of the banking system stable.
Outlook seemed to have improved recently as data showed stabilization. Meanwhile, China is expected to sign the phase one trade deal with the US, likely on January 15. Yet, more support measures are still expected as growth would likely cool further in 2020.
