Xinhua, Beijing :
The People’s Bank of China (PBOC) decided on Sunday to cut the reserve requirement ratio (RRR) for RMB deposits by one percentage point starting from Oct. 15, but the stance of China’s monetary policy remains unchanged.
The fourth RRR cut of the year will cover the yuan deposits of large commercial banks, share-holding commercial banks, city commercial banks, non-county rural commercial banks and foreign banks.
Wen Bin, chief researcher of China Minsheng Bank, said that the move would unleash 1.2 trillion yuan of capital into the market, but it would not change the central bank’s stance of sticking to a prudent and neutral monetary policy, as its goal was to reduce financing costs of the real economy.
A statement of the central bank said that some of the liquidity unleashed will be used to pay back the 450 billion yuan of the medium-term lending facility (MLF) that will mature on Oct. 15.
Zeng Gang, a researcher with the Institute of Finance and Banking of the Chinese Academy of Social Sciences, said using the RRR cut to replace the MLF operation could optimize the maturity structure of credit, allow financial institutions to access long-term funds steadily and therefore reduce the financing costs of the real economy.
This was the second time that the central bank used RRR cuts to replace MLF operation this year.
Wu Qing, chief economist of the China Orient Asset Management Company, said that the move was consistent with market expectations, and in the future, the central bank might continue to use MLF and other tools to make fine adjustments on liquidity.
According to the central bank, the incremental capital of 750 billion yuan will be injected into the market to support small, micro and private enterprises and innovative enterprises to enhance the vitality and resilience of the Chinese economy, strengthen endogenous growth momentum and promote the healthy development of the real economy.
The move remains targeted at adjustment with a goal to optimize the liquidity structure of commercial banks and the financial market and to reduce financing costs, said the central bank.
