China releases $ 188 billion from banks in second reserve requirement cut of the year

China’s central bank announced that it will cut the amount of cash banks must keep in reserve, its second such move this year, freeing up 1.2 trillion yuan ($ 188 billion) in long-term liquidity to fuel growth. economic, which has slowed down.

The People’s Bank of China (PBOC) said on its website that it would cut banks’ mandatory reserve ratio (RRR) by 50 basis points (bp), starting on December 15.

The world’s second-largest economy, which saw an impressive rebound from last year’s pandemic recession, has lost momentum in recent months as it grapples with a slowing manufacturing sector, debt problems in the housing market, and persistent outbreaks of COVID- 19.

Some analysts believe growth could slow further in the fourth quarter from 4.9% in the third quarter, although full-year growth could still be around 8%.

“Lowering the RRR will help ease downward pressure on the economy and smooth the economic growth curve,” said Wen Bin, senior economist at Minsheng Bank.

“Although there is little pressure to achieve this year’s economic growth target, economic work will face great pressures and challenges next year,” he added.

The government has set a relatively modest annual economic growth target, above 6%, for this year, emerging from the 2020 pandemic.

The cut, the second this year after a general reduction in July, was cited by Prime Minister Li Keqiang on Friday as a way to increase support for the economy, especially small businesses.

The cut will not apply to financial institutions with an existing RRR of 5%, he said, adding that the weighted average bank reserve requirement for financial institutions will be 8.4% after the new reduction.

The RRR for large banks, after considering the preferential policy of targeted haircuts for inclusive financing, is currently at 10.5%.