**MNI Policy: China PBOC Cuts RRR To Boost Economy

     **BEIJING (MNI) - China's central bank on Sunday cut the reserve

requirement ratio (RRR), the portion of capital that lenders must set aside, to

boost liquidity and reduce funding costs for the real economy.

     The People's Bank of China (PBOC) lowered the RRR for commercial banks and

rural cooperatives by 1 percentage point (100 bps) from Oct. 15, injecting net

CNY750 billion after retiring some lending instruments, it said on its website.

The cut unlocked total CNY1.3 trillion, it said.

     "The RRR cut is to optimize the liquidity structure and enhance the

capacity of the financial sector to serve real economy," the PBOC said in the

statement, "With the credit expansion, financial institutions need long and

medium-term liquidity," it added.

     The cut is still defined as a "targeted adjustment" as CNY450 billion will

be used to repay PBOC's medium-term lending facility (MLF) maturing on Oct. 15.

     "The prudent and neutral bias of monetary policy hasn't changed," the

central bank asserted. The PBOC won't flood the market with liquidity but will

focus on targeted adjustment and remain liquidity at reasonable and adequate

level, it said.

     The move won't put pressure on the yuan exchange rate, as the yuan is able

to remain stable at a reasonable and balanced level given the country is

competitive in exports, its economy depends on domestic demand and the

manufacturing industry is robust, the PBOC said.

     "The central bank will continue to act at a necessary pace to stabilize

market expectation and keep the forex market stable," it said.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

[TOPICS: MAQDS$,MMQPB$,M$A$$$,M$Q$$$,MT$$$$]