Economy Mar 16

PBOC imposes huge cuts to RRR on long-term funds

Central bank to reduce return on funds on March 16 to boost the 'real' economy

by By Huang Wanyi Xu Jiangshan
550-bn-yuan RRR cut on long-term funds
Citizens walk past the People's Bank of China in Beijing. The central bank has announced a further cut in RRR on long-term funds to boost liquidity. Photo: AFP

(ATF) – China's central bank will implement targeted cuts next week on the Required Rate of Return (RRR) totalling 550 billion yuan (US$78.7 billion) on long-term funds.

The People's Bank of China said this would help create a stable monetary policy, with more flexibility, and support the real economy's recovery from the virus crisis, according to a CCTV news report.

In order to support the development of the real economy and reduce the actual cost of social financing, the PBOC decided to implement an inclusive financial targeted reduction on March 16, 2020, and targeted the banks to meet its assessment standards by 0.5 to 1 percentage point.

In addition, qualified joint-stock commercial banks will get a further reduction of 1 percentage point to support the issuance of loans to the financial sector. The above-mentioned targeted RRR cuts total 550 billion yuan of long-term funds.

PBOC said it would not flood financial markets, but take into account internal and external balances, and maintain a reasonable and adequate liquidity.

The scale of currency credit and social financing growth is compatible with economic development, creating a suitable monetary and financial environment for high-quality development and supply-side structural reforms, the central bank said.