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China Reduces Bank Reserve Requirement to Overcome Slowdown

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Published on : Apr 20, 2015

The central bank of China on Sunday reduced the amount of capital, which banks must maintain as reserves. This reduction is the second cut in 2 months that will affect the entire industry, by adding additional liquidity to the second-largest economy of the world in supporting to promote bank lending and fight declining growth rate.

The PBOC (People's Bank of China) has decreased the RRR (reserve requirement ratio) for all the banks by hundred basis points to 18.5%, effectual from April 20, 2015, the central bank affirmed in a statement published on its website.

A report featured by the official Xinhua news service that covered the announcement, stated that although the development in the 1st quarter have met the target put by the officials that was of around 7% for the year 2015, the slowdown in various areas, comprising the industrial output and the retail sales, has rooted concerns.

The recent cut, which is the biggest single reduction since the global crisis in the year 2008, exhibits that how the central bank is picking up efforts to defend against a sharp decline in the economy.

Suppressed by a factory overcapacity, property downturn, and the local debt, the development is likely to slow down to a quarter-century low of around 7% in this year from 7.4% in the year 2014. However, the last reserve requirement ratio cut was taken as more self-protective by several economists, as it was to assist in offsetting the increase in the capital outflows mainly.

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