The People’s Bank of China (PBOC) said on its website that it would cut banks’ mandatory reserve ratio (RRR) by 50 basis points (bp), starting on December 15.
The world’s second-largest economy, which saw an impressive rebound from last year’s pandemic recession, has lost momentum in recent months as it grapples with a slowing manufacturing sector, debt problems in the housing market, and persistent outbreaks of COVID- 19.
Some analysts believe growth could slow further in the fourth quarter from 4.9% in the third quarter, although full-year growth could still be around 8%.
“Lowering the RRR will help ease the downward pressure on the economy and smooth the economic growth curve,” said Wen Bin, senior economist at Minsheng Bank.
“Although there is little pressure to achieve this year’s economic growth target, economic work will face great pressures and challenges next year.”
The government has set a relatively modest annual economic growth target, above 6%, for this year, emerging from the 2020 pandemic.
The cut, the second this year after a general reduction in July, was cited by Prime Minister Li Keqiang on Friday as a way to increase support for the economy, especially small businesses.
The cut will not apply to financial institutions with an existing RRR of 5%, he said, adding that the weighted average bank reserve requirement for financial institutions will be 8.4% after the new reduction.
The RRR for large banks, after considering the preferential policy of targeted haircuts for inclusive financing, is currently at 10.5%.
By Stella Qiu and Kevin Yao, from Reuters agency
Source From: Ambito
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