As expected, the PBoC slashed its reserve ratio requirement overnight:
To support the development of real economy and steadily bring down overall financing costs, the PBC is scheduled to cut the required reserve ratio (RRR) for financial institutions (excluding those that have already implemented an RRR of 5 percent) by 0.5 percentage points on December 15, 2021. The weighted average RRR for financial institutions will be 8.4 percent after the cut.
The PBC will continue to implement a sound monetary policy. Pursuing stability as its top priority, it will refrain from indiscriminate liquidity injection, and strike a balance between internal and external equilibria. The PBC will keep the liquidity adequate at a reasonable level, and keep the growth of money supply and the aggregate financing to the real economy (AFRE) basically in line with the nominal GDP growth. With improved cross-cycle adjustments, it will coordinate the macro policies for this year and next year, and support small and medium-sized enterprises, green development, and sci-tech innovation. The measures will create a favorable monetary and financial environment for the high-quality development and the supply-side structural reform.
