China’s central bank will slash the reserve requirement ratios (RRR) of some Chinese commercial banks, freeing up around RMB 750 billion ($109.2 billion) in fresh funds for the country’s banking system.
The RRRs for large commercial lenders and smaller banks currently stand at 15.5% and 13.5% respectively. Both will be cut by 100 basis points under the latest move, following on from a similar-sized cut back in April.
The cut will initially release up to RMB 1.2 trillion yuan in liquidity, with RMB 450 billion of this used to offset maturing medium-term lending facility loans.
Xu Hongcai, deputy chief economist at a Beijing think tank, told Reuters that more cuts could follow.
“The trade war’s impact on the economy is showing. There is room for further reductions and I expect another 1 percentage point cut by the year-end,” said Xu.