BEIJING: China’s central bank said on Monday it would cut the amount of cash that banks must hold as reserves, its second such move this year, releasing 1.2 trillion yuan in long-term liquidity to bolster slowing economic growth amid persistent COVID-19 cases.
The People’s Bank of China (PBOC) said on its website it would cut the reserve requirement ratio (RRR) for banks by 50 basis points (bps), effective from Dec. 15.
The cut will not apply to financial institutions with existing RRR of 5%, it said, adding that the weighted average RRR for financial institutions will be at 8.4% after the new reduction.
Currently, the RRR for large banks, after taking into consideration the preferential policy of targeted cuts for inclusive financing, is at 10.5%.
Some of the funds released will be used to replay matured medium-term lending facility loans, according to PBOC.
The cut, the second this year following a broad-based reduction in July, was flagged by Premier Li Keqiang on Friday as a way to step up support for the economy, especially small firms.
The world’s second-largest economy, which staged an impressive rebound from last year’s pandemic slump, has lost momentum in recent months as it grapples with a slowing manufacturing sector, debt problems in the property market and persistent COVID-19 outbreaks.
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The new Omicron coronavirus variant has also added uncertainty, as Beijing’s zero-COVID approach to stamp out local cases hit many small businesses.
China’s move to wean property developers away from rampant borrowing has translated into loan losses for banks and pain in credit markets, as cash-strapped builders fall into distress, increasing risks across the economy.
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