China cuts bank reserve first time in 2023

Oluwanifemi Ojo
Oluwanifemi Ojo
People's Bank of China, Beijing. Credit: Reuters

China’s central bank announced on Friday that it will reduce the amount of cash that banks must retain as reserves for the first time this year.

The aim of the reserves cut according to the bank is to to maintain a surplus of liquidity and to promote the country’s economic recovery.

The second-largest economy in the world is slowly recovering from a pandemic-induced setback after bans from Covid were abruptly relaxed in December.

Reuters reported that Chinese leaders have however pledged to step up support for one of the world’s giant economies.

The People’s Bank of China said, “ it would cut the reserve requirement ratio for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points, effective March 27.”

The central bank said the cut in bank reserves is part of its plans to “make a good combination of macro policies, improve the level of services for the real economy, and keep liquidity reasonably sufficient in the banking system.”

To support the economy, the central bank of China has promised to make its policy “precise and forceful” this year. Also, to maintain a healthy level of cash and keep corporate funding expenses low.

It was reported that in the first two months of 2023, China’s economic activity increased as infrastructure investment and consumer spending helped the country recover from pandemic disruptions.

In the midst of a global recession, exports are still weak, and the crisis-stricken real estate market is only slowly recovering.

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