Chinese Central Bank Cuts Reserve Requirement Ratio By 0.5%

The People's Bank of China has just cut the reserve requirement ratio for banks by 0.5%.The cut is apparently due to take place on February 24.

After the cut, reserve requirement ratio will be 20.5% and 17% for large-sized and small & medium size financial institutions respectively.

This ratio cut is the first time this year. Last time Central Bank announced to cut the Reserve Requirement Ratio was on 30^th November 2011, and that was the first cut in the past three years.

Analysts said, this 5% reserve requirement ratio decreasing adjustment means further release on liquidity of banking system and mitigation of current financial strain in the market, with enterprises investment and credit demand gradually return to normal after Chinese New Year.

On a rough calculation, there will be 400 billion RMB of banking system liquidity released at one time after this cut.

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