China cuts reserve requirement ratio by 0.25 percentage point
Updated 20:23, 14-Sep-2023

The People's Bank of China (PBOC) on Thursday announced that it will cut the reserve requirement ratio (RRR) by 0.25 percentage point for financial institutions starting September 15.

After the cut, the weighted average RRR for financial institutions will stand at around 7.4 percent.

The decision of cut was a bid to consolidate the foundation for economic recovery and maintain reasonable and sufficient liquidity, said the PBOC.

Experts have expressed that the cut comes at a critical moment for economic recovery.

After recent interest rates cuts and financial policies adjustments in the real estate sector, the second RRR cut this year shows China's determination to stimulate the country's economy, they said.

The recent combination of macro policies in fiscal, taxation, real estate, and monetary policies have significantly improved market expectations. At the same time, recent cuts have effectively encouraged financial institutions to increase investments in the real economy, experts said.

With the recovery of market confidence, the year-on-year consumer price index in August turned from negative to positive, and the year-on-year decline in producer price index also converged for two consecutive months. The experts also expect price levels in China to recover moderately.

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