China's first RRR cut for financial institutions in 2025 takes effect

A 0.5 percentage point reduction in the reserve requirement ratio (RRR) for eligible financial institutions takes effect Thursday, with the move expected to inject roughly 1 trillion yuan ($139 billion) of long-term liquidity into the financial market.

The RRR cut, the first such move since the start of this year, was announced last week by the People's Bank of China, China's central bank.

The latest RRR cut has multiple effects, such as promoting the recovery of domestic demand and accelerating structural adjustment, Lian Ping, director and chief economist of Guangkai Chief Industry Research Institute, told Xinhua News Agency.

Gao Ruidong, the chief economist at Everbright Securities, told Xinhua that increasing the supply of long-term funds through RRR cut will maintain reasonable and ample liquidity.

The RRR cut was among a raft of supportive measures that also included policy rate cut and increased financial support through relending facilities announced by Chinese monetary and financial regulatory bodies recently, as the world's second-largest economy steps up efforts to stabilize markets and sustain economic recovery amid external headwinds.

Also starting Thursday, the RRR for auto financing and financial leasing companies is slashed by 5 percentage points to zero percent, with the cut expected to increase the credit supply capacity of these two types of institutions in their respective fields.