China's central bank cuts reserve requirement ratio to support economy

07 Dec '21

1 min read

Pic: Kanpisut Chaichalor | Dreamstime.com

To support development of the economy, the People’s Bank of China (PBOC), the country’s central bank, has decided to cut the reserve requirement ratio (RRR) for financial institutions by 0.5 percentage points, effective December 15. However, the new rate would not be applicable for those financial institutions that already implement a 5-per cent RRR.

Post-reduction, the weighted average RRR for financial institutions in China will stand at 8.4 per cent, PBOC said in a statement.

The latest RRR cut is expected to result in a release of 1.2 trillion yuan (about $188.4 billion) in long-term funds. A part of the released funds will be used to repay the maturing medium-term lending facilities, while the rest will be used to replenish long-term funds to better meet the needs of market entities, the statement added.

The reduction will also lower the fund costs for financial institutions by around 15 billion yuan per year, according to the PBOC calculation.

PBOC said it can guide financial institutions to actively use the funds released to strengthen support for the economy, especially smaller enterprises, and lower the comprehensive financing cost.

Fibre2Fashion News Desk (RKS)

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