China cuts reserve requirement ratios by 50bps to boost credit supply

China is set to lower some banks’ reserve requirement ratios (RRR) by 50 basis points on July 5, the country’s central bank said Sunday.

The People’s Bank of China (PBOC) would cut the RRR for most banks to support qualified debt-to-equity swap programs and help small businesses in financing, according to an online statement

The move is an implementation of decisions made at a State Council executive meeting on June 20, PBOC said. The meeting decided targeted cuts in banks’ RRR and other monetary policy tools will be used to boost credit supply to small and micro businesses.

Funds released by the cut were about ¥700 billion (about 108 billion U.S. dollars), with ¥200 billion set for easing credit strain for small and micro businesses.

PBOC will continue to create a sound environment for the country’s high-quality growth and supply-side structural reform, it said.

An earlier cut to the benchmark RRR was in April 25, when the rate was lowered by 1 percentage point to help small businesses and to improve overall stability and liquidity in the economy.