Coronavirus: China central bank to free up US$57 billion for small lenders in latest effort to help economy

The People’s Bank of China set to cut the required reserve ratio for rural and regional banks to free up 400 billion yuan (US$57 billion)

But the central bank still in no hurry to cut benchmark deposit rate, which would affect hundreds of million Chinese deposit holders

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China’s central bank has unveiled a host of targeted measures to help its coronavirus-hit economy. Photo: Reuters

Published: 7:45pm, 3 Apr 2020Updated: 9:31am, 6 Apr 2020

China’s central bank on Friday said it would pump two rounds of funds into rural and regional lenders in the latest “targeted” measure to help the economy amid the coronavirus outbreak.

The People’s Bank of China (PBOC) said it would cut the required reserve ratio for the banks on April 15 and May 15, releasing 400 billion yuan (US$57 billion) in total and freeing up more money to lend to rural households and small businesses.

The central bank also said it would adjust down the interest rates on additional reserves – excess money stored at the central bank by commercial lenders – to 0.35 per cent from 0.72 per cent, effective on April 7, so that China’s banks would be more willing to lend.

The move came hours after a central bank official speaking in the capital Beijing said that the PBOC was in no hurry to cut the benchmark deposit rate, the rate that determines how much hundreds of millions Chinese deposit holders can get from their banks.

Liu Guoqiang, a deputy governor at the PBOC, said such a move may hurt the “feelings” of deposit holders, underlining the bank’s reluctance to join other central monetary authorities – such as the US Federal Reserve – in slashing interest rates.