China’s central bank announced on September 6 it would cut the reserve requirement ratio (RRR) by 50 basis points and reduce the ratio by 100 basis points for small and private enterprises, the Xinhua News Agency reported.
Taking effect September 16, the move aims to stimulate the economy by reducing the amount banks must hold in reserve and provide greater credit support for small businesses, the People’s Bank of China (PBoC) said.
The RRR cut will reduce the cost of social financing while easing capital shortages for smaller companies, read an article in the Beijing Youth Daily.
The cut will not affect inflation or stock markets, as the PBoC has clarified that it will continue to implement a sound monetary policy, the paper said.
However, the central government should keep an eye out for negative influences from the real estate sector, the article read. Authorities must strengthen regulation on capital flow and watch for commercial banks taking advantage of policy loopholes to lend to real estate speculators.
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