China's RRR cut not aiming at short-term liquidity: CICC

0 Comment(s)Print E-mail Xinhua, October 3, 2017
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China's latest cut in reserve requirement ratio (RRR) is not intended to ease short-term liquidity pressure, but is rather part of the government efforts in structural adjustment, according to a major investment bank.

The objective of the RRR cut is not to "replenish short-term market liquidity, although it will likely boost market sentiment over liquidity conditions and lift banks' profitability," said China International Capital Corporation Limited (CICC) in a report.

China's central bank on Saturday announced a targeted RRR cut to steer inclusive financing at commercial banks, such as credit support for small and micro-sized enterprises, startups and agricultural production.

The new policy, which goes into effect in 2018, offers commercial banks a RRR cut of 0.5 to 1.5 percentage points from next year if their annual outstanding or new loans in inclusive financing reach certain requirements.

The investment bank estimates that the cut, after implementation, may release more than 800 billion yuan (about 120 billion U.S. dollars) of liquidity into the economy.

China's central bank also explained that Saturday's RRR cut does not change the overall monetary policy stance.

The CICC report also said there is relatively low probability of another RRR cut in the near term, as it expects resilient growth and faster consumer price increase in the fourth quarter.

China's GDP grew 6.9 percent in the first half of the year, above the government's targeted growth of around 6.5 percent for 2017. Growth data for the third quarter is due for release on Oct. 19.

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