China’s Central Bank cuts reserve requirement ratio to boost economic recovery

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14th September 2023 – (Beijing) The People’s Bank of China (PBOC) announced on Thursday its decision to reduce the reserve requirement ratio (RRR) as part of efforts to strengthen the foundation of the country’s economic recovery. The benchmark ratio, which determines the amount of cash banks are required to hold in reserve, will be lowered by 0.25 per cent to approximately 7.4 per cent, effective from Friday.

This move marks the third key rate reduction by the central bank in recent weeks, as China’s economy continues to face challenges following the end of its isolationist zero-COVID policy in late 2022.

The PBOC stated in a press release, “Currently, China’s economic activities are maintaining their recovery momentum, and social expectations are steadily improving.”

The rate cut does not apply to banks that have already implemented a 5 per cent RRR, clarified the statement.

The central bank believes that this reduction in the ratio will “consolidate the foundation of economic recovery and ensure reasonable and sufficient liquidity.” Additionally, it emphasised the commitment to implementing prudent monetary policies accurately and effectively, with the goal of achieving qualitative improvement and sustainable growth in the economy.

This announcement comes ahead of the anticipated release of key economic indicators on Friday, which analysts predict will show a modest improvement compared to previous months.