China to cut reserve ratio for banks

China’s central bank said it would cut the amount of cash that banks must hold in reserve, its second such move this year, releasing 1.2 trillion yuan ($188 billion) in long-term liquidity to bolster slowing economic growth.

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

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

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

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

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

The government has set a relatively modest annual economic growth target, at above 6%, for this year, coming off the pandemic-stricken 2020.