China frees up $56 billion for virus-hit economy by slashing small banks’ reserve requirements
BEIJING: China’s central bank said on Friday it was cutting the amount of cash that small banks must hold as reserves, releasing around 400 billion yuan ($56.38 billion) in liquidity to shore up the economy, which has been badly jolted by the coronavirus crisis.
The latest stimulus move comes as the world’s second-largest economy looks likely to shrink for the first time in at least 30 years.
Hopes for a quick recovery are being soured by the rapid spread of the disease worldwide, crushing global demand.
“The deterioration of the global economy is bound to have a great impact on China’s economy, which requires that China’s policy should be further loosened and be more flexible,” said Yan Se, chief economist at Founder Securities.
The People’s Bank of China said on its website it will cut the reserve requirement ratio (RRR) for those banks by 100 basis points (bps) in two equal steps, the first effective as of April 15 and the second as of May 15.
China has about 4,000 small and mid-sized banks. The latest cuts would lower their RRR to 6%.
In addition, the interest rate on financial institutions’ excess reserves with the central bank would be reduced to 0.35% from 0.72%, effective April 7, the PBOC said.
The RRR cut was flagged by the cabinet on Tuesday along with other support measures as Beijing tries to cushion the economic blow from the pandemic, which is fanning worries about heavy job losses. – Reuters