China cuts bank reserve requirements to boost economy

Monday 29 February 2016 15.27
People's Bank of China cuts its reserve requirement ratio
People's Bank of China cuts its reserve requirement ratio

China's central bank today cut the proportion of funds banks must set aside as reserves, in the latest attempt to tackle slowing growth in the world's second largest economy. 

The People's Bank of China said it would trim the so-called "reserve requirement ratio" (RRR) for financial institutions by 0.50 percentage points. 

The move came after a G20 finance ministers' meeting in Shanghai, which stressed the use of all available tools to boost growth, and with Chinese and global stock markets assailed by worries over the economy. 

The decision also pre-empted the opening this weekend of the annual session of the National People's Congress, China's rubber stamp parliament.

China's economy grew an annual 6.9% in 2015 - the lowest in a quarter century - and analysts widely expect it to slow further this year. 

The RRR cut, which was widely expected by analysts, is the first across the board reserve ratio cut since October last year, when the central bank also lowered it by the same margin.

Chinese Premier Li Keqiang is widely expected to declare a lower growth target at the NPC meeting, probably a range of 6.5-7%. 

The People's Bank of China said that the RRR move aimed at maintaining liquidity and guiding the steady growth of money and credit. 

On Friday, on the sidelines of the G20 ministers meeting, the Chinese central bank's chief Zhou Xiaochuan said it could still use monetary tools to help boost the slowing economy. 

"China still has some monetary policy space and monetary policy tools to address potential downside risk," he stated.