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China cuts reserve requirement ratio to boost economy

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China’s central bank cut the amount of cash banks must keep in reserve in an effort to stimulate the economy as it gradually recovers from pandemic restrictions and a property market slump.

The People’s Bank of China reduced the reserve requirement ratio for almost all banks by 0.25 percentage points, effective from March 27, it said in a statement on Friday. The PBOC last cut the RRR in December, by the same magnitude.

Economic activity rebounded in the first two months of the year, official data showed this week, although growth in industrial output wasn’t as strong as analysts had expected and unemployment picked up.

The yuan pared an advance of as much as 0.6 percent, trading 0.3 percent stronger at 6.88 in the onshore market after the PBOC’s move.

The government had set a fairly muted gross domestic product growth target of around 5% for this year, suggesting it wouldn’t roll out significant monetary and fiscal stimulus. PBOC Governor Yi Gang, who was reappointed to his post, signalled recently that monetary policy would remain stable, saying interest rates were appropriate.

The PBOC said Friday it aims to “maintain reasonable and sufficient liquidity” and keep the growth rate of money supply in line with nominal economic growth. It said it won’t engage in “flood irrigation,” a term it uses to refer to large stimulus.

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