China's Central Bank to Cut Required Reserve Ratio by 100 Bips This Month
Chen Juan
/SOURCE : yicai
China's Central Bank to Cut Required Reserve Ratio by 100 Bips This Month

(Yicai Global) Jan. 4 -- China's central bank will cut the reserve requirement ratio by 100 basis points, its fifth move of this kind in the last 12 months, as it looks to support economic growth.

The reduction will take place over two equal phases on Jan. 15 and Jan. 25, the People's Bank of China said in a statement posted online today. Financial institutions will also provide further financial support for private and small companies, it added.

The announcement came shortly after Chinese Premier Li Keqiang visited several state-owned commercial lenders today and told officials at the China Banking and Insurance Regulatory Commission that the country needs to cut back the RRR, taxes and fees. China's reserve requirement ratios are currently 14.5 percent for large banks and 12.5 percent for smaller banks.

The rate cuts are just one part of China's broader plans to ease financial woes in the private sector and at smaller companies. Other measures so far include the introduction of perpetual bonds, a new monetary tool called a targeted medium-term lending facility, and plans unveiled yesterday by the PBOC to allow more banks to lend small businesses as much as CNY10 million (USD1.5 million) each, double the amount they could previously provide.

China's private sector contributes to more than 50 percent of taxes, 60 percent of gross domestic product, 70 percent of innovation, 80 percent of urban employment and 90 percent of newly added jobs and businesses in the country, according to Vice Premier Liu He, the cabinet member who oversees the financial and industry sectors.

President Xi Jinping has also spoken out in favor of private companies, saying in a public letter in October that their historic contribution to China's developed "should not be doubted" as he looked to inspire confidence among the nation's businesspeople despite an economic slowdown.

"The private sector should seize the trend of the times, focus on innovation, run companies with a down-to-earth approach and work together to make a better tomorrow," Xi said.

Editor: James Boynton

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Keywords: Required Reserve Ratio , PBOC