China central bank cut rural banks’ reserve requirement

Nathan Andrada – Fourth Estate Cooperative Contributor

Beijing, China (4E) – The Chinese central bank announced on Tuesday that it will cut the share of deposits that some rural lenders are required to set aside as reserves, in an effort to boost the economy.

The People’s Bank of China (PBOC) warned that the decision does not mean a shift in monetary policy but said it would result to higher lending to the agricultural sector.

The reserve-requirement ratio — the percentage of deposits that must be retained as cash with the PBOC — will be reduced by 2 percentage points for rural commercial banks in the county level and cut by 0.5 percentage point for rural cooperatives, according to the central bank in a statement.

Last week, the central government said it would decrease the reserve requirement ratio for some qualified rural banks, but did not elaborate.

After the cut takes into effect on Friday, the ratios will be at 14 percent for cooperatives and 16 percent for rural commercial banks, the PBOC said.

The central bank also said that the reserve requirement for these two types of lenders could further fall by another percentage point if a certain percentage of their funds are used for local lending. The central bank declined to provide further details.

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