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CHINA-BANK-RESERVE
Economic Watch: China to cut reserve requirement ratio, with monetary
policy unchanged : Economic Watch
BEIJING, Oct. 8, 2018 (BSS/Xinhua) – The People’s Bank of China (PBOC)
decided on Sunday to cut the reserve requirement ratio (RRR) for RMB deposits
by one percentage point starting from Oct. 15, but the stance of China’s
monetary policy remains unchanged.
The fourth RRR cut of the year will cover the yuan deposits of large
commercial banks, share-holding commercial banks, city commercial banks, non-
county rural commercial banks and foreign banks.
Wen Bin, chief researcher of China Minsheng Bank, said that the move would
unleash 1.2 trillion yuan of capital into the market, but it would not change
the central bank’s stance of sticking to a prudent and neutral monetary
policy, as its goal was to reduce financing costs of the real economy.
A statement of the central bank said that some of the liquidity unleashed
will be used to pay back the 450 billion yuan of the medium-term lending
facility (MLF) that will mature on Oct. 15.
Zeng Gang, a researcher with the Institute of Finance and Banking of the
Chinese Academy of Social Sciences, said using the RRR cut to replace the MLF
operation could optimize the maturity structure of credit, allow financial
institutions to access long-term funds steadily and therefore reduce the
financing costs of the real economy.
This was the second time that the central bank used RRR cuts to replace MLF
operation this year.
Wu Qing, chief economist of the China Orient Asset Management Company, said
that the move was consistent with market expectations, and in the future, the
central bank might continue to use MLF and other tools to make fine
adjustments on liquidity.
According to the central bank, the incremental capital of 750 billion yuan
will be injected into the market to support small, micro and private
enterprises and innovative enterprises to enhance the vitality and resilience
of the Chinese economy, strengthen endogenous growth momentum and promote the
healthy development of the real economy.
The move remains targeted at adjustment with a goal to optimize the
liquidity structure of commercial banks and the financial market and to
reduce financing costs, said the central bank.
MORE/HR/1442
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CHINA-BANK-RESERVE 2 BEIJING
The PBOC will continuously implement a prudent and neutral monetary policy,
refrain from using a deluge of stimulus and focus on targeted adjustment to
maintain sound and sufficient liquidity, facilitate rational growth in
monetary credit and social financing and create a proper monetary and
financial environment for the country to pursue high-quality economic
development and advance the supply-side structural reform, it said.
The RRR cut will fill in the liquidity gap of banks and put no downward
pressure on the yuan as the country’s monetary policy is not eased, according
to the PBOC statement.
There are sufficient conditions for the RMB exchange rate to remain
basically stable at a reasonable and balanced level, it said.
“The PBOC will continue to take necessary measures to stabilize market
expectations and keep the foreign exchange market running smoothly,” it said.
Dong Ximiao, a researcher with the Chongyang Institute for Financial
Studies of the Renmin University of China, noted that the steadily growing
Chinese economy also faced challenges.
Apart from ensuring reasonably sufficient liquidity, the government could
also use fiscal and taxation policies to stimulate growth and enhance
economic sustainability, Dong said.
BSS/XINHUA/HR/1445