Money in China
China - Money
PBOC cuts RRR to bolster liquidity
In the face of tighter domestic liquidity conditions due to ongoing capital outflows and strong demand for funds related to the Chinese New Year holidays, on 29 February, the People’s Bank of China (PBOC) announced a cut to the reserve requirement ratio (RRR) for the second time since October 2015. Effective 1 March, the PBOC reduced the RRR for large banks by 50 basis points to 17.00%, while the RRR for smaller institutions was lowered to 15.00%. With this move, monetary authorities expect to inject around CNY 700 billion (USD 108 billion) into the financial system while also signaling that monetary policy conditions will remain soft in the foreseeable future.
In the last few months, monetary authorities had preferred to use other tools to cope with the squeezing effect of capital outflows on domestic liquidity as additional easing could have exerted further depreciation pressures on the Chinese yuan. However, as liquidity injections have proven to be insufficient to improve financial conditions, coupled with the fact that exchange rate pressures have eased somewhat in recent weeks, authorities believed that it was the right timing to deliver a cut to the RRR.
FocusEconomics Consensus Forecast panelists expect the one-year lending rate and the one-year deposit rate to end the year at 3.96% and 1.16%, respectively. For next year, the panel sees the benchmark lending rate at 3.99% and the benchmark deposit rate at 1.21%.
China - Money Data
|Money (annual variation in %)||12.2||13.3||11.3||8.1||8.1|
5 years of economic forecasts for more than 30 economic indicators.
China Money Chart
Source: People's Bank of China and FocusEconomics calculations.
|Bond Yield||3.17||-0.40 %||Dec 31|
|Exchange Rate||6.96||-0.19 %||Jan 01|
Get a sample report showing our regional, country and commodities data and analysis.
Request a Trial
Start working with the reports used by the world’s major financial institutions, multinational enterprises & government agencies now. Click on the button below to get started.
February 10, 2020
Consumer prices rose 1.4% over the previous month in January, well above December’s flat reading.
January 30, 2020
The manufacturing Purchasing Managers’ Index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) fell from December’s 50.2% to 50.0% in January.
January 23, 2020
On 15 January, the United States and China signed off on a “phase one” trade deal, as had been expected.
January 17, 2020
In December, nominal retail sales grew 8.0% on an annual basis, matching the result in November.
January 17, 2020
Industrial production increased 6.9% year-on-year in December, above November’s 6.2% expansion.