The People’s Bank of China’s cutting of the reserve requirement ratio (RRR) for Chinese banks by 0.5 percentage points has become effective as of September 27, a move which had been awaited following the US Federal Reserve’s interest rate cut last week and the PBOC’s announcement on September 24 that it would make such a cut. This will release RMB 1 trillion ($142 billion) in long-term liquidity into the market.
Meanwhile, from September 27, the open market seven-day reverse repurchase operation rate has been adjusted from the previous 1.7 percent to 1.5 percent, down 20 basis points. This move will likely lead to a decline in the loan prime rate (LPR) next month.
The PBOC stated that it will adhere to a supportive monetary policy, increase the intensity of monetary policy regulation and control, improve the precision of monetary policy regulation and control, and create a favorable monetary and financial environment for the steady and high-quality economic development of China.