China central bank to cut cash amount some banks must hold as reserve
BEIJING China's central bank said yesterday it would cut the amount of cash that some banks must hold as reserves by 50 basis points in a move designed to stimulate lending to smaller businesses in need of funds.
The reserve cut, the third by the central bank this year, had been widely anticipated by investors amid concerns over market liquidity and a potential economic drag from trade disputes with the US.
The targeted cut in some banks' reserve requirement ratios (RRRs) - currently 16 per cent for large banks and 14 per cent for smaller banks - will take effect on July 5, the People's Bank of China (PBOC) said in Sunday's online statement.
The central bank said targeted RRR cuts will release about 500 billion yuan (S$104 billion) for the country's five large state banks and 12 national joint-stock commercial banks.
The lenders are encouraged to use the money to conduct debt-for-equity swaps, it said.
RRR cuts will also release about 200 billion yuan in funding for mid-sized and small banks to increase lending to credit-strapped small businesses, PBOC said.
The central bank said it will maintain neutral and prudent monetary policy as it seeks to cultivate an appropriate monetary and financial environment for China's economic growth and supply-side structural reforms.
Chinese policymakers have said that the country will use targeted RRR cuts to boost financing to struggling smaller firms, as well as other measures. - REUTERS
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