The People’s Bank of China (PBOC) announced on Friday, September 6, that it would lower the reserve requirement ratio for financial institutions by 0.5 percent, effective September 16. China’s central bank said the move was to support the real economy and reduce social financing costs. The reserve requirement ratio is the minimum amount of reserves that must be held by a commercial bank.
In addition, the PBOC will lower the reserve ratio of 1 percent for the urban commercial banks. These measures are to be implemented on October 15 and November 15, respectively, with a 0.5 percent reduction each time. In other words, the PBOC will have successively lowered the reserve ratio for urban commercial banks three times, with a total reduction of 1.5 percent.
It is estimated that this round of ratio reductions will release funds of 900 billion yuan ($126 billion).
Earlier this year, the PBOC already implemented two rounds of reductions: a comprehensive ratio reduction of 0.5 percent in January and another 0.5 percent reduction for small and medium-sized banks between May and July.
Source: Radio Free Asia, September 6, 2019