China’s central bank announced Friday that it will cut the amount of cash financial institutions need to hold in reserve, releasing 530 billion yuan ($83.1 billion) of liquidity into the financial system.
The move comes as the country is fighting its worst wave of Covid outbreaks, while the war in Ukraine has pushed up commodity prices, adding to the downward pressure on its economy.
The People’s Bank of China (PBOC) said it will cut the reserve requirement ratio (RRR) by 25 basis points for financial institutions. The reduction will take place on April 25.
The reduction aims to increase long-term funds and reduce funding costs for financial institutions, which could help lower businesses’ borrowing costs, the PBOC said in a statement.
On top of that, the PBOC said it will reduce the RRR for some city commercial banks and rural commercial banks by an additional 25 basis points. That aims to enhance support for micro and small businesses, as well as the agricultural sector, it said.
Still, the PBOC said that it will maintain a stable monetary policy and keep liquidity reasonably ample.
Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)
Get our weekly free Must-Read newsletter.
