China’s central bank signaled it may cut the reserve requirement ratio for banks to boost rural finance, a targeted action that would help cushion the economy as it cools down.
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The People’s Bank of China (PBOC) revealed that it will use monetary tools, including the reserve ratio and lending and discounting policies for rural development.
Earlier this week, PBOC Governor Yi Gang promised to boost credit support to the economy and expand efforts to cut down real lending rates for businesses.
China’s central bank has in the past cut the required reserve ratio for rural banks to encourage lending to the agricultural industry and small businesses.
Any cut in the RRR will likely be targeted that injects less than 500 billion yuan of liquidity, given the effective RRR for small banks is already very low at 5.5%.
China’s 10-year sovereign bond yields declined as much as 3 basis points to 2.86% and rebounded to 2.87% at 10.09 a.m. Beijing time on Friday.