The People's Bank of China, the country's central bank, announced a cut to the reserve requirement ratio on Thursday, delivering a clear signal that policymakers are ramping up policy support for the country's economic recovery.
The PBOC will reduce the RRR, which refers to the proportion of money that lenders must keep as reserves, by 0.25 percentage points, effective on Friday, the central bank said in a statement. The move marks the second RRR cut so far this year.
Aimed at consolidating the foundation of economic recovery and keeping market liquidity reasonably ample, the cut will bring financial institutions' weighted average RRR to about 7.4 percent, according to the central bank.
Experts said the move will release medium to long-term liquidity of more than 500 billion yuan ($68.7 billion), tamp down banks' funding costs and provide more scope for declines in interest rates and financing costs.
The PBOC added that it will better support key areas and weak links in the economy and provide solid support for the recovery of the real economy while also keeping the renminbi exchange rates generally stable.