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Breaking news: China’s central bank cuts cash reserves releasing $83.2 billion to save economy

By Joshua Manning • Updated: 03 May 2022 • 19:44

Boxer Amir Khan robbed at gunpoint in East London

Boxer Amir Khan robbed at gunpoint in East London.

China’s central bank has announced a cut to its reserve requirement ratio to help boost its economy amidst the worst Covid breakout since 2020.

On Friday 15, April, The People’s Bank of China stated that it will cut the reserve requirement ratio (RRR) for commercial banks by 0.25% percentage points which will benefit rural banks as well as small commercial banks with the release of 530 billion yuan ($83.2 billion) into the bank system on April, 25.

“In light of changes in the current situation, we will encourage large banks with higher provisions to lower provision ratios in an orderly manner and will use monetary policy tools, including RRR cuts, in a timely way,” the State Council announced after a meeting chaired by Premier Li Keqiang.

The RRR sets the minimum amount of cash reserves that must be held by banks and that are not allowed to be loaned out, with the last cut by the People’s Bank of China being seen in December 2021, where it was cut by 0.5 percentage points to allow for 1.2 trillion yuan to be released in the aid of major commercial banks. 

“The People’s Bank forwent the opportunity to lower its policy rates. That’s somewhat surprising given the sharp economic downturn and recent calls from China’s leadership for monetary support,” said Julian Evans-Pritchard, senior China economist at Capital Economics after the PBOC left the MLF rate unchanged.” in a report by China Macro Economy.

“It underscores the reluctance of the central bank to aggressively ease policy. But we think it will have little choice but to do more before long. We continue to anticipate another 20 basis point of policy rate cuts this year and a further acceleration in credit growth. That said, the PBOC’s hesitancy to loosen policy suggests that large-scale stimulus of the kind seen in 2009, 2016 and 2020 doesn’t appear to be on the cards this time.”

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Written by

Joshua Manning

Originally from the UK, Joshua is based on the Costa Blanca and is a web reporter for the Euro Weekly News covering international and Spanish national news. Got a news story you want to share? Then get in touch at editorial@euroweeklynews.com.

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