China's central bank has announced on June 24 its decision to lower the reserve requirement ratio (RRR) - the minimum level of deposits banks must hold - by 0.5 percentage point effective from July 5 for five large state-owned commercial banks, twelve joint stock commercial banks, postal banks, city commercial banks, non-county rural commercial banks, and foreign-funded commercial banks.
China’s central bank said it aims to guide financial institutions to increase support to small and micro enterprises, and to further promote the debt-to-equity swap program. The PBOC designed the cut to do two different things, according to the statement. The RMB 500 billion ($77.0 billion) unlocked for the nation’s five biggest state-run banks and 12 joint-stock commercial lenders will be channeled to debt-to-equity swaps, which can reduce companies’ debt burdens and help cleaning up banks’ balance sheets. The RMB 200 billion ($31.0 billion) freed for smaller lenders such as the postal bank and city commercial lenders will be used to support funding for smaller businesses.