In a significant move to boost its economy, China’s central bank announced it will reduce the reserve requirement ratio (RRR) for banks by 0.5 percentage points. This cut is set to release approximately 1 trillion yuan (about $138.9 billion) in long-term liquidity into the market.
Pan Gongsheng, governor of the People’s Bank of China, made the announcement on Wednesday, stating that the measure aims to enhance the stability and sustainability of financial support for the real economy. By lowering the RRR, banks will have more funds available to lend, potentially stimulating economic growth and supporting businesses.
This move comes as the Chinese mainland seeks to maintain steady economic development amid global uncertainties. The additional liquidity is expected to aid small and medium-sized enterprises and bolster employment.
Economists believe this decision reflects the central bank’s commitment to proactive fiscal policies. “Injecting long-term funds can help ease financing difficulties for companies and encourage investment,” said a financial analyst.
The cut will apply to most banks, excluding those that have already implemented a 5% reserve ratio. The adjustment is scheduled to take effect on September 15.
The international community is watching closely, as China’s economic policies often have ripple effects on global markets. For young entrepreneurs and businesses in the Global South, this could signal new opportunities for trade and collaboration with the Chinese market.
