China central bank says RRR should be appropriately lowered to ease burden on banks

Big 5

– China’s central bank said on Tuesday that banks’ reserve requirement ratios (RRR) should be appropriately lowered to ease the burden on the country’s financial institutions.

However, as China is still a developing country, it is still necessary to keep the RRR at relatively high levels, the central bank said in a working paper published on its website.

The People’s Bank of China (PBOC) also said it is urgent to transform China’s monetary policy from a quantity-based mode to a price-based mode, adding that authorities will gradually unify market interest rates, deposit and lending rates.

The PBOC in April unexpectedly cut reserve requirement ratios (RRR) for most banks, in a move that was earlier and more aggressive than expected, highlighting concerns over liquidity and the potential economic drag from a trade war with the United States.

Many analysts expect further RRR cuts in coming months as China’s economic growth starts to cool under pressure from rising borrowing costs and a regulatory crackdown on riskier lending practices.