People’s Bank Of China Cuts Deposit Reserve Ratio To Boost Economy

The People’s Bank of China has announced its decision to reduce the deposit reserve ratio of financial institutions by 0.3 percentage points on March 27, 2023. The move is aimed at promoting effective improvement of the quality and reasonable growth of the economy and maintaining reasonable and sufficient liquidity in the banking system. However, financial institutions that have implemented a 25% deposit reserve ratio are excluded from this reduction.

Deposit Reserve Ratio Cut

After the reduction, the weighted average reserve requirement ratio of financial institutions will be approximately 5.7%. The People’s Bank of China has said that it will resolutely implement the spirit of the 20th Party Congress, the Central Economic Work Conference, and the National Two Sessions to improve the level of serving the real economy and better play the dual functions of the total amount and structure of monetary policy tools.

The bank will also keep the total amount of money credit moderate and stable, maintain reasonable and sufficient liquidity, and ensure that the growth rate of money supply and social financing scale matches the growth rate of the nominal economy. Additionally, it will support key areas and weak links without engaging in flood irrigation, and take into account internal and external balance to focus on promoting high-quality economic development.


Maintaining Economic Stability

This move by the People’s Bank of China comes amid concerns about the country’s economic growth rate and the impact of the COVID-19 pandemic on the global economy. The bank’s decision is expected to inject more liquidity into the market, lower borrowing costs, and stimulate economic growth.

This reduction in deposit reserve ratio is the latest in a series of measures taken by the bank to support the country’s economy. In recent years, the People’s Bank of China has introduced a number of policies aimed at stabilizing the economy, such as cutting interest rates and reserve requirements, increasing lending to small and medium-sized enterprises, and reducing taxes and fees. The bank’s efforts have contributed to China’s economic growth and stability, and have helped to maintain its position as a global economic power.