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China to cut reserve requirement ratio for second time this year to boost economic growth amid strong headwinds
- PBOC decision comes only three days after Premier Li Keqiang said China would cut the RRR ‘at an appropriate time’
- Move comes amid signs that China’s economic growth is slowing, while a downturn in the property market appears imminent
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China’s central bank has announced its second reserve ratio cut this year to shore up the economy, as the nation’s leaders prioritise stability ahead of a key political meeting next year.
The People’s Bank of China said on Monday that it will cut the reserve requirement ratio (RRR) for major commercial banks by 0.5 percentage points, releasing 1.2 trillion yuan (US$188 billion) worth of long-term liquidity into the interbank system on December 15 with an aim of supporting the Chinese economy in the face of growing headwinds.
The move comes amid signs that China’s economic growth is slowing, while a downturn in the property market is imminent as developer Evergrande Group’s debt restructuring could also trigger a tightening of the credit market.
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Ensuring economic and social stability has moved to the top of Beijing’s agenda in the lead-up to next year’s political gathering that will usher in a leadership reshuffle, and the central government has been signalling more policy easing.
In a statement issued after its meeting on Monday, the Communist Party’s 25-member Politburo, China’s primary decision-making body chaired by President Xi Jinping, said the country will “put the word of stability as the top priority” in its economic decision-making for 2022.
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