China to inject CNY1,200bn into financial system from 15 October

08 October 2018 07:03 Source:ICIS News

SINGAPORE (ICIS)--China’s central bank will inject a total of yuan (CNY) 1,200bn ($174bn) into its financial system from 15 October via a one-percentage point cut in the banks’ reserve requirements.

China yuan notes. (Photo by How Hwee Young/Epa/REX/Shutterstock)

This is the fourth time that the central bank cut the reserve requirement ratio (RRR) of banks this year.

Injecting funds into the system will help rev up the domestic economy as China’s exports will be hit by its escalating trade war with the US.

The RRR, which refers to the portion of deposits that financial institutions must park with the central bank, will be reduced next week to 14.5% for big commercial banks and to 12.5% for smaller banks, according to PBoC.

The move will release CNY750bn in cash into the banking system, while an additional CNY450bn will be used to offset maturing medium-term lending facility (MLF).

PBoC said that the RRR cut is not expected to create further downward pressure on the Chinese yuan, adding that it will continue to adopt necessary measures to keep the foreign exchange market stable.

The yuan has shed about 10% of its value against the US dollar since early February, largely on account of the US-China trade war.

PBoC referred to its monetary policy on Monday as “prudent and neutral”, adding that it “will focus on targeted control" of liquidity "and maintain reasonable and abundant liquidity to guide the rational growth of monetary credit and social financing”.

China is a major importer of petrochemicals in Asia.

The Chinese markets re-opened on Monday, after a week-long National Day holiday in the country that slowed down regional petrochemical trades.

($1 = CNY6.89)

Additional reporting by Pearl Bantillo

ICN

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By Fanny Zhang