Straits Herald January 1, 2020

China’s central bank announced Wednesday it was cutting the reserve requirements for banks, freeing up about $114 billion to boost lending and spur the slowing economy.

The People’s Bank of China will cut the reserve requirement ratio (RRR) on January 6 by 50 basis points, it said in a statement, reducing the amount of cash banks must hold.

Lowering the RRR for banks frees up more money for lending to small businesses. 

The central bank cut the requirement three times in 2019 to bolster the Chinese economy, which grew at the slowest rate in three decades last year.

State news agency Xinhua said the latest cut will “offset the impacts of cash demand” ahead of the Spring Festival in late January.

Cooling domestic demand and a bruising trade war with the United States have contributed to the economic slowdown.

Washington and Beijing last month announced a “Phase One” trade deal, de-escalating their nearly two-year trade war as President Donald Trump reduced or cancelled some tariffs while Beijing promised to adopt trade reforms and buy more US farm exports.

The partial trade agreement will be signed in the middle of January, Trump said Tuesday, announcing that he will also travel to China for continued talks. – AFP