China cuts reserve requirement ratio to boost economy, releasing US$83.2 billion into banking system
- People’s Bank of China decision comes only two days after Premier Li Keqiang said there will be a ‘timely’ reduction in the reserve requirement ratio (RRR)
- He also said other policy tools could be used to support the economy which is faltering amid the country’s worst coronavirus outbreaks in two years
China’s central bank on Friday announced a much-anticipated cut of its reserve requirement ratio (RRR), or the amount of cash that banks must hold in reserve, to shore up its slowing economy amid growing headwinds.
Though the 0.25 percentage point reduction was below market expectations, the People’s Bank of China (PBOC) said following the decision that the current level of liquidity is sufficient and the move is aimed at helping sectors hit by the coronavirus pandemic.
The world’s second largest economy faces mounting challenges as an Omicron outbreak plagues more than 70 cities nationwide and lockdowns in commercial and financial hubs disrupt economic activities.
Friday’s decision marks the third reserve cut in the current easing cycle, following 0.5 percentage points cuts in July and December last year.