PBOC Turning Over Profits More Effective Than RRR Cut: Daily

The People’s Bank of China’s move to transfer over CNY1 trillion in profits to the central government is equivalent to releasing the same amount of base currency, which will better spur the economic growth than a cut to reserve requirement ratio, the Economic Daily reported citing Wang Yiming, a member of the PBOC’s Monetary Policy Committee. An RRR cut will increase available funds of commercial banks but may not necessarily lead to credit expansion, while profits transferred by the PBOC will become increased fiscal spending to help companies and residents, effectively boosting demand, the newspaper said citing Wang. As of mid-April, CNY600 billion in profits has been turned in to fund tax rebates and transfer payments to local governments, which is basically the same as a 25 bp RRR cut, the newspaper said.