China cuts bank reserve ratio again to aid recovery

• China’s central bank said on Thursday it would cut the amount of cash that banks must hold as reserves for the second time this year to boost liquidity and support the country’s economic recovery.
• The People’s Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points from Sept. 15.
• The reduction follows a 25-bps cut for all banks in March and comes as the world’s second-biggest economy is struggling to sustain a post-pandemic recovery.
• The move is expected to free up over 500 billion yuan ($68.71 billion) for medium to long term liquidity, an official at the central bank was cited by state media Xinhua as saying.
• The central bank said the weighted average reserve requirement ratio (RRR) for financial institutions stood at around 7.4% after the cut.
• Dan Wang, chief economist at Hang Seng Bank China, cautioned to watch for a cut in Medium-term Lending Facility (MLF) on Friday off the back of the RRR cut.
• “That would be more significant than the RRR cut and suggest central bank is up to something,” said Wang.

External Link : https://asia.nikkei.com/Business/Finance/China-cuts-bank-reserve-ratio-again-to-aid-recovery