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China Reduces Reserve Requirement Ratio To Boost Economy

  • Writer: Tejas Rokhade
    Tejas Rokhade
  • Jan 8, 2020
  • 2 min read

China’s central bank The People’s Bank of China (PBOC) announced to reduce Reserve Requirement Ratio (RRR) by 50 basis points. w.e.f January 6. The RRR cut done to boost investor confidence and support the economy will release around 800 billion yuan ($114.91 billion).


Crux of the Matter


  1. The PBOC has cut RRR eight times since 2018 to free up more funds for banks to boost economic growth.

  2. The central bank has said that the small and medium banks would receive roughly 120 billion yuan which should be used to fund small and local businesses which were hard hit as regulators clamped down on riskier types of financing and debt.

  3. Record debt defaults and problems at some smaller banks have added strain on China’s financial system.

  4. Another cut in China’s new loan prime rate (LPR) is expected later in January.

  5. Recently China has started making changes to major policy lending rates to lower corporate financing costs.

  6. With U.S.A – China Trade deal expected to be signed; signs of positive growth is likely to be seen.

  7. China’s growth has reduced to 6% in the third quarter in 2019 from 6.8% in 2017.

  8. China plans to set a lower economic growth target of around 6% in 2020, relying on increased state infrastructure spending to ward off a sharper slowdown.

Curiopedia


The Economy of China has transitioned from a centrally-planned system to a more market-oriented economy, which currently ranks as the second-largest in the world by nominal GDP and the largest in the world by purchasing power parity. According to the IMF, on a per capita income basis, China ranked 73rd by GDP (PPP) per capita in 20hc19.The country has natural resources with an estimated worth of $23 trillion. China also has the world’s largest total banking sector assets of $39.93 trillion with $27.39 trillion in total deposits. It has the fourth-largest inward foreign direct investment, and the eleventh-largest outward foreign direct investment. More Info

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