China cuts banks’ reserve requirement ratio for second time this year, ahead of August data release
- Move by People’s Bank of China comes as world’s second-largest economy has been struggling to bounce back this year
- Reserve requirement ratio will be cut by 0.25 percentage points on Friday
China’s central bank has announced a fresh cut to the amount of cash that banks must hold as reserves, as Beijing continues to make moves to shore up economic recovery.
The People’s Bank of China said it would cut the reserve requirement ratio (RRR) for yuan deposits by 0.25 percentage points, to 7.4 per cent, effective Friday.
The move – the second such cut this year – is to “consolidate the foundation of economic recovery and keep ample liquidity”, the central bank said in a brief statement.
The cut, which is expected to release around 500 billion yuan (US$68.7 billion) worth of liquidity into the market, came just before China is expected to release economic indicators for August on Friday. The data will offer insight into the effects of Beijing’s targeted policies to reinvigorate the private sector, bolster consumption, shore up the property sector and restore the confidence of foreign investors.
The central bank also vowed to implement a “precise and forceful” monetary policy, and to keep the yuan’s exchange rate stable.
“[It marks] another policy measure to boost economic growth, which reflects the government’s determination to stabilise the economy,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management. “This is a step in the right direction.