In order to shore up the development of the real economy and steadily bring down overall financing costs, the People’s Bank of China (PBC) is scheduled to cut the required reserve ratio (RRR) for Chinese financial institutions by 0.25 percentage points (excluding those that have already implemented an RRR of five percent) as of April 25, 2022.
To ramp up the support for micro and small businesses (MSBs) and agriculture, rural areas and farmers, urban commercial banks serving businesses only within the province where the banks are registered and rural commercial banks implementing an RRR of over five percent will enjoy an additional RRR cut of 0.25 percentage points. The weighted-average RRR for financial institutions will be 8.1 percent after the cut.
Financial expert Dong Ximiao stated that the cut in the RRR matches market expectations, and will enhance the ability and willingness of financial institutions to serve the real economy.
The cut in the RRR this time will release RMB 530 billion ($83 billion) into the economy, by increasing the funds available to financial institutions.