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China economy
EconomyChina Economy

China’s central bank frees up US$115 billion to support growth

  • People’s Bank of China to cut banks’ reserve ratio by 0.5 percentage points from January 6, it announces
  • The move will provide 800 billion yuan (US$115 billion) to the real economy

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The bank said the funding was partially to offset withdrawals before Lunar New Year. Photo: Reuters
Sidney Leng

China’s central bank has announced a move to unleash 800 billion yuan (US$115 billion) from the banking system to support the economy, sending a pro-growth message on the first day of 2020.

The People’s Bank of China (PBOC) will reduce the deposit reserve ratio in financial institutions by 0.5 percentage points from January 6, mainly to offer sufficient funding to the real economy, according to a notice published on the bank’s website.

The announcement on Wednesday came after growth continued to weaken while China and the United States prepared to sign an interim trade deal in mid-January.
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The central bank said this round of funding was partially to offset cash withdrawals before the Lunar New Year, and would not change its stance on monetary policy.

From Monday, the reserve requirement ratio (RRR) for big banks will be lowered to 12.5 per cent, while the ratio for medium and small banks will be reduced to 10.5 per cent and 7 per cent respectively. In 2019, the central bank cut the RRR rate three times.

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“The RRR cut will help boost investor confidence and support the economy, which is gradually steadying,” said Wen Bin, an economist at Minsheng Bank in Beijing, who also expects another cut in China’s new loan prime rate this month.
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