BEIJING: China will cut the amount of cash that banks must hold as reserves, releasing around 1 trillion yuan ($154.19 billion) in long-term liquidity to underpin its post-Covid economic recovery that is starting to lose momentum.
The People's Bank of China (PBOC) said on its website it would cut the reserve requirement ratio (RRR) for all banks by 50 basis points (bps), effective from July 15. The world's second-largest economy has largely rebounded to its pre-pandemic growth levels, driven by a surprisingly resilient export sector. But growth is losing steam and smaller firms are bearing the brunt of a recent surge in raw material prices.
Many analysts believe pent-up Covid demand has now peaked and that growth rates will start to moderate in the second half of the year, weighed down by weakening exports, surging producer price inflation and Beijing's continued crackdown on the property market.
"I see it as more or less a fine-tuning rather than a signal that there is more monetary easing coming," said Elwin de Groot, head of macro strategy at Rabobank.