PBoC: Surprise cut in the reserve requirement ratio - TDS

The PBoC in China surprisingly cut the reserve requirement ratio on some banks (effective from 25 April) by 1%, which will release CNY 1.3trn of liquidity, explains the research team at TDS.

Key Quotes

“The liquidity will be used to repay commercial bank loans from the central bank under its medium term lending facility. We do not think this should be seen as a policy easing but rather a move to shift banks sources of funding from PBoC to Banks' Reserve deposits. There is little need to ease actual policy rates in our view, with China continuing to maintain a "prudent and neutral" stance as it balances deleveraging with growth.”