To support the real economy and ensure that overall financing costs are stable with a slight decrease, the People’s Bank of China (PBC) is scheduled to reduce required reserve ratio by 0.5 percentage points effective July 15 (not applicable to financial institutions that already carry a required reserve ratio of 5%). The action will reduce the weighted average required reserve ratio of financial institutions to 8.9%.
In light of rising costs for micro and small businesses (MSBs) caused by increasingly higher commodity prices this year, the monetary policy in China maintains its stability and continues to pursue effectiveness. Instead of indiscriminate stimulus, the PBC adopts targeted measures such as increasing the support for MSBs. It will maintain a sound monetary policy and prioritize financial stability. In particular, it will ensure that liquidity is adequate at a reasonable level and that the growth of money supply and aggregate financing to the real economy is in line with nominal GDP growth. The PBC will also focus on inter-temporal policy designs to support small and medium-sized enterprises, green development, and innovations of science and technology, so as to provide a favorable monetary and financial environment for high-quality development and supply-side structural reforms.
