China to cut reserve requirement ratio

BEIJING -- China's central bank said Friday it will cut the reserve requirement ratio (RRR) for financial institutions by 0.25 percentage points from March 27 to keep liquidity reasonably ample and better serve the real economy.

The cut will not apply to financial institutions that have already implemented a 5-percent RRR, the People's Bank of China said in a statement.

After the reduction, the weighted average RRR for financial institutions will reach around 7.6 percent, according to the statement.

Wen Bin, the chief economist of China Minsheng Bank, said since the beginning of this year, the central bank increased the scale of open market operations and medium-term lending facility operations, leading to net money supply and maintaining overall stable liquidity.

The timely RRR cut will release long-term liquidity into the financial system and help banks lower capital costs and better manage their assets and liabilities, Wen continued.

"In particular, the cut will play a positive role in guiding financial institutions to increase support for the real economy and lower financing costs," he said.

The central bank said it would make prudent monetary policy precise and effective, better utilize monetary policy tools, keep liquidity reasonably ample, and ensure the growth of money supply and social financing basically in line with nominal economic growth.

The central bank will also make monetary policy better support key areas and weak links and avoid "flood-like" stimulus to promote high-quality economic development.