MNI BRIEF: PBOC Cuts Reserve Requirements, Unlocking CNY1 Tln

Easier U.S. monetary policy should give the People’s Bank of China more room to support the economy, Governor Pan Gongsheng told reporters on Wednesday, announcing a 50-basis-point reserve requirement ratio cut effective Feb 5 to unlock CNY1 trillion.

The Bank also lowered targeted relending rates for agriculture and small business by 25bp from Friday, moves which together with deposit rate cuts will help lower the benchmark Loan Prime Rate, Pan said, adding that the Bank will ensure liquidity for government debt issuance and enhance tools to prevent one-way forex moves. (See MNI: China Could Seek Moderate Easing Soon To Lift Growth)

A new PBOC department will boost credit to technology, green growth, small business, aged care and digitalisation, but loans to sectors in oversupply face restrictions as the central bank prioritises stable, moderate inflation said Pan, noting sluggish domestic demand and weak expectations. Developed world monetary policy will ease this year, supporting the yuan and capital flows.