China's central bank, the People's Bank of China, implemented a 0.5 percentage point cut to the reserve requirement ratio (RRR) for financial institutions on Thursday, marking its first such adjustment in 2025. The move is projected to inject approximately 1 trillion yuan ($139 billion) of long-term liquidity into the financial system, a strategic step to bolster economic stability amid global uncertainties.
The RRR reduction targets domestic demand recovery and structural adjustment, according to Lian Ping, director of Guangkai Chief Industry Research Institute. 'This reinforces China's proactive monetary policy to address external pressures while maintaining ample market liquidity,' said Gao Ruidong, chief economist at Everbright Securities, in an interview with Xinhua.
The policy aligns with recent measures including targeted relending programs and interest rate adjustments, underscoring Beijing’s commitment to sustaining economic momentum. Separately, the RRR for auto financing and financial leasing firms was cut by 5 percentage points to 0%, enabling these sectors to expand credit access for consumers and businesses.
Analysts highlight the RRR cut’s dual role: stabilizing short-term market confidence while channeling funds toward strategic industries. As the world’s second-largest economy navigates shifting global trade dynamics, these measures aim to foster resilience in key sectors, from manufacturing to green energy.
