Concerns Over Q4 Growth Rate Plunge... People's Bank of China Lowers Reserve Requirement Ratio by 0.25%P

[Asia Economy Reporter Kim Min-young] The People's Bank of China, the central bank of China, announced on the 25th that it will lower the bank reserve requirement ratio by 0.25 percentage points (p) starting from the 5th of next month.

This reserve requirement ratio cut is expected to supply long-term liquidity of 500 billion yuan (approximately 92.8 trillion won). After the cut, the average reserve requirement ratio in the Chinese financial sector will decrease to 7.8%.

China has lowered the reserve requirement ratio a total of seven times since January 2020 to mitigate the impact of COVID-19. When the reserve requirement ratio is lowered, the mandatory cash ratio that commercial banks must deposit decreases, resulting in an increase in funds circulating in the market.

Earlier on the 24th, the Hong Kong South China Morning Post (SCMP), citing a Nomura Securities report, analyzed that regions accounting for 21.1% of China's current gross domestic product (GDP) have been locked down, restricting the movement of approximately 412 million people across 49 cities in China.

The report forecasted that within a few weeks, regions accounting for more than 30% of GDP will be closed, and as a result, the economic growth rate for the fourth quarter of this year is expected to plunge into negative territory.