China’s central bank said on Friday that it will cut the amount of cash that banks are required to hold as reserves to boost liquidity amidst a slowing economy.
The reserve requirement ratio (RRR) for all banks will be lowered by 0.5 percentage points – the lowest level since 2007 – with qualified city banks receiving a one percentage point reserve ratio cut.
The RRR cuts will release 900 billion yuan ($126 billion) of liquidity which will help the offset upcoming tax payments, said a People’s Bank of China (PBoC) statement. The broad cut is effective September 16 and the second cut will release liquidity in two phases, effective October 15 and November 15.
The latest PBoC moves are expected to provide funding support to smaller firms but the central bank noted that it has no intentions to engage in large scale monetary easing.
