People’s Bank of China has announced plans to reduce reserve requirement ratios (RRRs) for some small and medium-sized lenders.
The reduction, which will come into effect on 15 May, will release about CNY280bn ($41bn) in long term funds in the market supporting the economy.
The decision comes at a time when the US President Donald Trump further intensified trade tensions between the two countries by threatening to impose additional tariffs on Chinese imports.
China RRR cut: Details
China will reduce the RRR for around 1,000 rural commercial banks, Reuters reported citing a statement issued by the country’s central bank.
The reserve capital rates will be decreased to 8%, equalling the RRR for smaller rural credit cooperatives. Currently, the levels range between 10% and 11.5%.
The additional funds that will enter the market will primarily be used to support small and medium enterprises.
Additionally, the move is expected to decrease funding costs to the firms.
In the last one year, the central bank reduced the RR five times, the report added. The figure was reduced to 13.5% for larger lenders and to 11.5% for mid-sized and smaller banks.
The latest RRR cut follows China’s plans announced last week to further liberalise and open up its banking industry.
It also intends to eliminate the current asset requirement of $20bn for foreign banks to open branches in China.
The list of measures also includes dropping the $10bn asset requirement for banks looking to locally incorporate in China.