The People’s Bank of China (PBoC) has reduced the reserve requirement ratios (RRR) of the country’s banks by 100 basis points.
The RRR ratio will be decreased in two phases. On 15 January 2019, the ratio will dip by 50 basis points.
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The ratio will dip by another 50 basis points on 25th of this month. The aim is to increase liquidity in order to support the country’s economic growth.
The phased reduction ensures “overall banking liquidity stays reasonable and sufficient while balancing internal and external factors to keep the yuan’s exchange rate at a reasonable and equilibrium level,” PBoC was quoted by Bloomberg as saying.
PBoC’s RRR reduction is targeted easing instead of wide-ranging stimulus, Bloomberg said.
The decrease in the ratio is expected to release a net RMB800bn ($116bn) of liquidity into the banking system, the central bank said.
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By GlobalDataMeanwhile, medium-term lending facilities due by the end of the first quarter will not be rolled over.
Last year, China’s central bank reduced the RRR ratio four times amidst a period of sluggish economic growth.
Recently, China has been making several efforts to open up its financial sector. Last year, the country eliminated the foreign ownership limit in domestic financial entities such as banks and asset management firms.
