The People’s Bank of China (PBOC) has announced that it will cut the reserve ratio for Chinese financial institutions by 0.5 percentage points on 15 December.
Following the reduction the weighted average reserve ratio of Chinese financial institutions will be 8.4%. The cut will not be applicable to financial institutions who already have a 5% reserve ratio.
A spokesperson from PBOC said that the move is expected to reduce the annual funding costs of Chinese financial institutions by approximately 15 billion yuan, and unleash 1.2 trillion yuan in long-term funds.
PBOC said that the goal of the cut is to provide further support to the growth of the real economy, and expedite reductions to overall financing costs while also keeping them stable.
The Chinese central bank also said that it would continue to implement stable monetary policy, uphold making stability the key word, refrain from large-scale irrigation, maintain rationally ample liquidity, and keep growth in the money supply and total social financing essentially on par with nominal economic growth.
It also committed to “strengthening cross-cyclical adjustment, performing overall effective dovetailing of macro-policy for the current year and next year, and supporting small and micro-enterprises, green development and tech innovation.”