China’s fresh bank ratio cut points to more monetary easing for economic revival
Premier Li Keqiang tells visiting US Treasury Secretary Jack Lew China still has room for more pro-growth fiscal stimulus and will press on with reforms
China’s central bank announced on Monday it would cut banks’ reserve requirement ratio, offering yet another sign that Beijing is committed to monetary easing to revive the economy.
The unexpected cut by the People’s Bank of China is the first since October and came after central bank governor Zhou Xiaochuan said in Shanghai last week that China would lean towards monetary easing to support growth.
Separately, Premier Li Keqiang said in talks with visiting US Treasury Secretary Jack Lew on Monday that China had room for the proactive fiscal policy and vowed to press ahead with reforms.
A cut of the reserve ratio allows banks to set aside fewer deposits which encourages them to lend more. The 0.5 percentage point cut, effective from Tuesday, could provide an additional 600 billion yuan (HK$713 billion) for banks to lend out.
The move suggested that the PBOC is less concerned about capital outflow and the yuan
It also suggests that the central is less worried about the yuan exchange rate weakening than it was a few weeks ago.