China’s central bank stated Friday it was paring the amount of cash that banks must keep as a balance for the third time this year, releasing 900 billion yuan ($126.35 billion) in liquidity to shore up the declining financial system.
Analysts had anticipated China to declare more policy easing measures quickly as the world’s second-largest economy comes below growing stress from escalating U.S. duties and sluggish domestic demand.
The People’s Bank of China mentioned it would pare the reserve requirement ratio (RRR) by 50 basis points (bps) for all banks, with an extra 100 bps cut for certified city commercial banks. The RRR for big banks will be reduced to 13.0%.
The PBOC has now gashed the ratio seven times since early 2018. The size of the newest move was at the higher end of market expectations, and the amount of funds released will be the largest to date in the current smoothening cycle.
The broad-based cut, which can release 800 billion yuan in liquidity, is effective Sept. 16. The additional focused reduction will issue 100 billion yuan, in two phases effective Oct. 15 and Nov. 15.
The newest measures to spur bank lending followed a cabinet meeting on Sept. 4 that vowed to implement broad as well as focused cuts in the RRR “in a timely manner.”
Analysts say China’s economic progress has likely cooled more this quarter from a near 30-year low of 6.2% in April-June. Morgan Stanley says it’s now monitoring the lower end of the federal government’s full-year goal range of about 6-6.5%.