China has room to reduce reserve ratio– top banker

China’s deputy central bank head, Xuan Changneng, stated that there is room for further cuts in banks’ reserve requirement ratio (RRR) and other policy tools to support the economy, Reuters reported on Thursday.

The People’s Bank of China (PBOC) has ample policy tools and may consider reducing the RRR, which currently stands at about seven per cent, Xuan added.

This move would inject liquidity into the economy and potentially expand the central bank’s balance sheet, which is around 45 trillion yuan ($6.25 trillion).

The PBOC implemented a 50-basis points RRR cut in January, the largest in two years, and analysts anticipate more reductions this year to stimulate growth.

The central bank’s decision to keep benchmark lending rates unchanged reflects some positive economic indicators.

China aims to promote effective investment, address excess capacity, and target a nominal economic growth rate of around eight per cent in 2024.

Premier Li Keqiang announced a 2024 economic growth target of around five per cent at the recent parliamentary meeting.

The country also set an inflation target of around three per cent, but analysts warn of deflationary risks and challenges in achieving the growth target amid the property sector crisis.