China cuts reserve requirements to support economic recovery

China's central bank said on Friday it would cut the amount of cash that banks must hold as reserves, releasing around $154.19 billion in long-term liquidity to help underpin an economic recovery that is starting to lose momentum.

The People's Bank of China (PBOC) said on its website it would cut the reserve requirement ratio (RRR) for all banks by 50 basis points (bps), effective on July 15.

Banks that are subject to an RRR of 5 per cent will be exempted from the new cut.

The PBOC last cut the RRR in April last year, when the Chinese economy was still badly jolted by the coronavirus crisis. As the economy staged a strong rebound, aided by the surprisingly resilient exports, the PBOC had since shifted to a moderately tightening bias.

The country's cabinet said on Wednesday that authorities will use timely cuts in RRR to help small firms cope with the negative impact of rising commodity prices, which came as a surprise to the market.