PBOC Cuts Reserve Requirement Ratio by 0.5%p, Injects 189 Trillion Yuan Liquidity

Indicates Possible Additional Price Cuts Within This Year

China has announced its plan to cut the bank reserve requirement ratio (RRR) in the near future. This move aims to supply liquidity to stimulate the economy, which shows no signs of recovery.

On the morning of the 24th, Pan Gongsheng, Governor of the People's Bank of China, stated at a joint press conference hosted by the State Council Information Office, "We will soon lower the RRR by 0.5 percentage points to provide long-term liquidity of 1 trillion yuan (approximately 189.4 trillion won) to the financial market."

Governor Pan also added, "Depending on the market liquidity situation, we may choose to further reduce the RRR within this year."

Amid concerns over deflation (falling prices during an economic downturn), the People's Bank of China lowered the RRR by 0.25 percentage points in April and December 2022, and again in March and September last year. In February, ahead of this year's Chunje (Lunar New Year) holiday, it implemented an additional 0.5 percentage point cut.

With consecutive RRR cuts, the weighted average RRR in China's financial sector has now reached about 6.9%.

As the economic slowdown continues, China, which has set an economic growth target of around 5% for this year, is deploying various stimulus measures including interest rate cuts.