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China’s central bank to ensure ample liquidity through targeted RRR cuts

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China’s central bank on Thursday said that it would ensure ample liquidity through targeted reserve requirement ratio (RRR) cuts for banks at an appropriate time.


The bank added that it would keep monetary policy prudent and flexible to support the economy.

China has announced a flurry of steps in recent weeks to shore up investor confidence and help keep smaller businesses afloat as the coronavirus epidemic severely disrupts economic activity.

Many analysts believe more support measures are likely soon as disruptions look set to extend well into the second quarter.

Recent surveys showed a third of the country’s smaller companies have only enough cash to last for a month, with another third believing they can hold out for two months.

The central bank will as far as possible reduce the impact of the epidemic so that economic goals for this year can still be achieved, Liu Guoqiang, vice governor of People’s security-in-south-sudan/” title=”Bank of China“>Bank of China (PBOC), told a news conference in Beijing.

“We’ll further release the long-term liquidity via multiple open market operation and make targeted RRR cuts in appropriate time for banks that meet the requirement of releasing inclusive loans and serve the smaller firms.’’ Liu said.

The central bank said on Wednesday that it would release another 500 billion yuan ($71.30 billion) to banks to extend cheap loans to small and medium-sized enterprises, on top of 300 billion yuan announced earlier this month for loans to companies that make health supplies such as masks and protective suits.

Replying to questions about increasing borrowing needs, Liu said that the PBOC would increase the re-lending and re-discount quota again if needed, and help the country’s smaller banks to replenish capital if they needed more funds.

Asked about whether the lending push could fuel credit risks, Liu said that China would keep the macro leverage ratio and prices stable.

Xiao Yuanqi, the chief risk officer of the China’s Banking and Insurance Regulatory Commission (CBIRC) said that authorities would ensure that there was no systemic financial risks, which is a red line.

“Support policies are mainly for smaller firms facing difficulties because of the virus outbreak, not those in difficult situations before.

“We’ll prevent non-performing companies from getting a free ride from the push, and prevent related moral hazard,’’ Xiao said.

Data from China’s Industry and Information Technology Ministry showed that only about 30 per cent of China’s small and medium enterprises have resumed normal production.

Therefore, officials are worried that many may have to start cutting jobs, putting additional pressure on the economy.

Small and mid-size firms account for more than 80 per cent of nationwide employment and more than 60 per cent of gross domestic product.

China’s banking sector may face a surge of up to 7.7 trillion yuan ($1.1 trillion) of non-performing loans (NPLs) in 2020 if the virus outbreak doesn’t peak until April, credit agency S&P Global estimated last week.

Edited By: Halima Sheji/Emmanuel Yashim



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Sheji Halima: is a graduate and a professionally trained journalist, with experience in national news reporting/editing and verification at the News Agency of Nigeria. NNN is a Nigerian online news portal that publishes breaking news in Nigeria, and across the world. Our journalists are honest, fair, accurate, thorough and courageous in gathering, reporting and interpreting news in the best interest of the public, because truth is the cornerstone of journalism and they strive diligently to ascertain the truth in every news report. Contact: editor[at]nnn.com.ng

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