China cuts banks’ reserve ratios by 100 bps as economy slows

China cuts banks' reserve ratios by 100 bps as economy slows
Headquarters of the People's Bank of China (PBOC), the central bank, is pictured in Beijing, China September 28, 2018. REUTERS/Jason Lee

China’s central bank said on Friday it was cutting the ratio of cash that banks must hold as reserves by 100 basis points (bps), as it looks to reduce the risk of a sharper slowdown in the world’s second-biggest economy.

The cut in banks’ reserve requirement ratios (RRR) is the first in 2019 and the fifth in a year by the People’s Bank of China (PBOC) as the economy faces its weakest growth since the global financial crisis and mounting pressure from U.S. tariffs.

The reduction is being made in two equal stages, effective Jan. 15 and Jan. 25, the PBOC said. The reserve requirement ratios (RRRs) are currently 14.5 percent for large banks and 12.5 percent for smaller banks.

Further cuts in the RRR had been widely expected this year, especially after a spate of weak data in recent months showed China’s economy was continuing to lose steam. The size of the move was on the upper end of market expectations. [ECILT/CN]

($1 = 6.8662 Chinese yuan renminbi)

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