China Frees Up $56 Billion for Lending to Coronavirus-Hit Businesses

BEIJING--China's central bank said Friday that it would lower the amount of cash banks are required to set aside as reserves for the second time in less than a month, as Beijing moved to stimulate a cooling economy hit hard by the coronavirus pandemic.

The People's Bank of China said it would cut the reserve requirement ratio for city commercial banks and rural lenders by one percentage point, freeing up 400 billion yuan ($56.48 billion) in liquidity in the banking system.

The PBOC said the reserve ratio will be reduced in two batches on April 15 and May 15, after which 4,000 banks and finance leasing companies in China will be required to park 6% of their deposits at the central bank.

The move was aimed at further encouraging more lending to the nation's struggling small businesses that are most vulnerable to shocks from the coronavirus, the central bank said.

The RRR cuts follow a targeted cut in mid-March and a universal cut at the start of 2020.

The central bank said Friday that it would also cut the interest rate for excess reserves, or the amount of deposits commercial banks park at the central bank in excess of regulatory requirements, to 0.35% from 0.72% previously. The cut is aimed at boosting lenders' efficiency in utilizing their funds, PBOC said.


  (END) Dow Jones Newswires
  04-03-20 0632ET
  Copyright (c) 2020 Dow Jones & Company, Inc.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.