CHINA’S central bank said on Friday it would cut the amount of cash that banks must hold as reserves by 50 basis points, the second reduction this year aimed at bolstering faltering economic growth.
The move takes effect Friday and was flagged on Tuesday by PBOC Governor Pan Gongsheng at a press conference, alongside cuts in several key interest rates and measures supporting capital markets aimed at stimulating economic activity amid persistent deflationary pressures.
The People’s Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5 per cent reserve ratio.
Pan had said such a move would free up about 1 trillion yuan (S$183 billion) for new lending and left the door open to another reduction later this year.
But analysts have noted businesses and consumers have little appetite to take on fresh debt given the uncertain economic outlook.
The reduction follows a 50-bps cut for all banks that took effect on Feb 5 and the weighted average RRR for financial institutions stood at around 6.6 per cent after the cut.
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Since then, however, indicators have shown China’s economy is still struggling. It grew much slower than expected in the second quarter, weighed down by a protracted property crisis and consumers’ worries about job security.
August economic data broadly missed expectations, adding urgency for policymakers to roll out more support. PBOC’s policy support announcement on Tuesday raised expectations among investors and economists that authorities would follow soon with a fiscal package to complement the monetary measures.
Depending on the market liquidity situation later this year, the RRR may be further lowered by 0.25-0.5 percentage points, Pan said at the Tuesday press conference, in rare