18th March 2023 – (Beijing) In a move that has been deemed timely, China’s central bank has injected liquidity into the banking system to counteract mounting pressures in the domestic banking industry and growing risks abroad. The state-owned Chinese newspaper, The Economic Daily, reports that the People’s Bank of China has lowered the reserve requirement ratio earlier than expected to support the nascent recovery of the world’s second-biggest economy. This early release of liquidity will help to ease the tension as the demand for funds has increased significantly amid the economic recovery. It will also prepare for the next phase of demand expansion.
The Economic Daily further notes that the overseas banking industry faces mounting risks, and the external environment is increasingly complex. Meanwhile, the domestic banking industry’s debt repayment costs are under pressure, and the net interest margin is continuing to narrow to historical lows. In response to these challenges, China’s central bank has made a timely move to lower the reserve requirement ratio and release long-term liquidity to the financial system.
The Global Times, a state-controlled tabloid, cites experts who suggest that the Chinese government’s decision not to follow the US in raising interest rates reflects its “responsibility to the world.” Instead, China is sticking to an independent monetary policy to support its economy, which is gradually rebounding from the pandemic-induced slump that began in December.
