China to cut reserve requirement ratio by 1 percentage point

The People's Bank of China (PBOC) decided Friday to cut the reserve requirement ratio (RRR) for RMB deposits by 1 percentage point.

The headquarters of the People's Bank of China in Beijing [File photo: IC]

The PBOC will cut the RRR by 0.5 percentage points on Jan. 15 and Jan. 25, respectively, a PBOC statement said.

In addition, the medium-term lending facility that will mature in the first quarter of 2019 will not be continued.

"The move will offset liquidity fluctuations caused by cash injections before the Spring Festival this year, and will help financial institutions continue to strengthen support for small and micro businesses as well as private businesses," the central bank said.

The move will unleash about 800 billion yuan (116.6 billion U.S. dollars) of capital into the market and effectively increase loan funding sources of small, micro and private businesses. It will also reduce the cost of bank interest payments by 20 billion yuan each year and therefore lower the financing costs of the real economy, according to the statement.

"The Chinese economy continues healthy development and stays within a reasonable range," it said.

"The central bank will continuously implement prudent monetary policy 'neither too tight nor too loose,' and refrain from using a deluge of stimulus and focus on targeted adjustment to maintain sound and sufficient liquidity, facilitate rational growth in monetary credit and social financing and stabilize macro leverage ratio to create a proper monetary and financial environment for the country to pursue high-quality economic development and advance supply-side structural reform."