The People’s Bank of China (PBOC), China’s central bank, announced on October 7 that it would lower the reserve requirement ratio for commercial banks (RRR, the sum commercial banks are required to hold in reserve) by one percent as of October 15.
It was the PBOC’s fourth RRR cut for 2018. The bank said it was intended to enable commercial banks to have more funds to repay their dues and better support the real economy by granting more loans to micro-and-small-sized enterprises. PBOC told media that the latest RRR cut would help release a total of 1,200 billion yuan (US$173b) in funds.
The PBOC has denied that the latest cut is a signal of easing monetary policy. It emphasized to media that the cut focuses on optimizing the structure of funding liquidity by guiding the destinations of commercial bank loans. Given it is targeted, it should not increase the risk of Chinese yuan depreciation, the PBOC said.
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