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China's Central Bank cuts reserve requirements ratioChina's Central Bank cuts reserve requirements ratio |
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Right after the weeklong National Day holiday, the Chinese Central Bank announced the plan to cut the amount of cash commercial banks must hold as reserves by one percentage point, effective from 15 October.
This is the fourth time China cuts the reserve ratio requirements (RRR) to spur its economy. This time, the cut would free up CNY 1.2 trillion (USD174.72 billion). Of that, CNY450 billion ($65.52 billion) will be for banks to repay short-term debt and CNY750 billion will be released into the financial market. Commercial banks will face a reserve-requirement ratio of 14.5%, down from 15.5% currently, the Wall Street Journal reported.
The move is expected to put additional pressure on the depreciating Chinese Yuan against the US dollar. While this might support Chinese supporter, the government is also planning measures to prevent heavy capital outflow.