Key Insights
- China cutting bank reserve requirements by 50 bps starting Feb 5, releasing $139 billion into financial system.
- Move aims to prop up struggling economy after growth slowed to 5.2% in 2023, missing forecasts.
- Comes as policymakers try to provide targeted stimulus without excessive liquidity flooding as global recession fears loom.
BEIJING – China will cut the amount of cash banks must hold as reserves from Feb. 5, releasing about 1 trillion yuan ($139.8 billion) to prop up an economy growing at its slowest pace in nearly half a century.
The People’s Bank of China (PBOC) said on Wednesday it would cut banks’ reserve requirement ratio (RRR) by 50 basis points (bps), following two similar cuts last year as authorities battle anaemic growth and a property crisis.
The world’s second-largest economy grew just 5.2% in 2023, missing forecasts as COVID lockdowns and a property crash took a toll. Growth of 5.2% was slightly below expectations for the fourth quarter as well.
While in line with Beijing’s target of around 5.5% for 2022, the annual growth rate was a sharp slowdown from 2021 and points to persistent softness for 2023 even as China drops stringent COVID curbs.
“There is still room for RRR cuts in the future,” PBOC Governor Pan Gongsheng told a briefing, suggesting authorities remain focused on easing after halting broad stimulus efforts in 2022.
The latest liquidity boost aims to help ailing smaller firms get back on their feet without flooding the system with stimulus – a balancing act for policymakers amid global recession fears.
We will strengthen financial support for the real economy, especially industries and small firms hit hard by the pandemic,Pan said.
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