PBOC RRR Cut 'Normal Operation,' No Changes in Policy Tilt: Top Advisor

The PBOC's broad cut in lenders' reserve ratios last week was a normal liquidity operation and should not be interpreted as the central bank has changed its prudent monetary policy orientation, the Financial News reported citing Wang Yiming, a member of the Monetary Policy Committee. The funds unlocked will help meet maturing MLFs, including CNY400 billion due in July, Wang was cited as saying. China will also encounter large-scale tax remission in July and government bond sales may also accelerate, Wang told the newspaper owned by the central bank. The RRR cuts will help banks improve financing capabilities as credit extended to the real economy has increased in recent years, increasing lenders' need for long-term capital, Wang was cited saying. The RRR cuts will also ease the difficulties of small businesses as the recovery remains unstable, while rising commodity prices raised production costs, Wang told the Financial News.