China cuts bank reserves to boost liquidity

The People’s Bank of China (PBOC) will reduce the Reserve Requirement Ratio (RRR) for all banks by 50 basis points (bps), ramping up liquidity with about one trillion yuan ($140 billion) to the market, Reuters said on Wednesday.

This step came in an attempt to support a fragile economic recovery amid plunging stock markets, which plummeted 13 per cent in 2023 and had extended its slide in the new year amid relentless foreign selling.

“The RRR cut is a sign that PBOC will stick to a loose monetary stance throughout this year, despite having missed market expectation of a medium-term lending facility (MLF) rate cut earlier,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.