situation report

China: Central Bank Cuts Reserve Requirement Ratio to Increase Domestic Lending

1 MIN READSep 6, 2019 | 14:38 GMT

What Happened: The People's Bank of China (PBOC) has announced that it will reduce the reserve requirement ratio for commercial banks by 50 basis points to encourage lending and boost domestic spending, Bloomberg reported Sept. 6.

Why It Matters: The reserve requirement reduction is the third by the central bank this year, bringing the ratio to its lowest point since 2007, at 13 percent for large banks and 11 percent for midsized and small banks. However, the Chinese government has thus far refrained from large-scale monetary easing, reflecting Beijing's confidence that increased lending will boost domestic growth.

Background: The PBOC's decision came after China's central government highlighted growing economic stress signals by the world's second-largest economy earlier this week as it faces increasing downward pressure from the escalating trade war with the United States.

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