China Lowers Reserve Requirement Ratio
July 09 2021 - 2:39AM
RTTF2
China's central bank cut its reserve requirement ratio for major
commercial banks in order to increase the fund available for
lending and support economic growth.
The People's Bank of China said on Friday that it will cut the
reserve requirement ratio by 0.5 percentage points, with effect
from July 15. The bank had last reduced the RRR for major banks in
March 2020.
The latest measure will release CNY 1 trillion of liquidity into
the system, the central bank said.
The PBoC is trying to nudge banks to lower lending rates without
shifting its broader policy settings, such as its quantitative
controls on credit, Julian Evans-Pritchard, an economist at Capital
Economics, said. The near-term economic implications of the RRR cut
are likely to be small.
The RRR cut is the first clear sign that, with the withdrawal of
last year's stimulus essentially complete, the focus of
policymakers is shifting towards managing structural strains,
including the balance sheet weakness of highly-indebted firms, the
economist added.
In June, Chinese banks extended CNY 2.12 trillion loans, which
was above the expected level of CNY 1.8 trillion and May's CNY 1.5
trillion.
The broad M2 money supply increased 8.6 percent annually in June
compared to the expected rate of 8.2 percent.
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