China'S Central Bank Announces Overall Reduction Of Deposit Reserve Ratio

In January 4th, the people's Bank of China announced that it would reduce the deposit reserve ratio in an all-round way.

In order to further support the development of the real economy, optimize the liquidity structure and reduce the cost of financing, the people's Bank of China decided to reduce the deposit reserve ratio of financial institutions by 1 percentage points, of which 0.5 percentage points were cut in January 15, 2019 and January 25th respectively.

Meanwhile, the medium-term credit facility (MLF), which is due to expire in the first quarter of 2019, will no longer be renewed.

This arrangement can basically hedge the Liquidity Fluctuation Caused by cash input before the Spring Festival this year, which will help financial institutions continue to increase their support for small and micro enterprises and private enterprises.

The RC will release funds of about 1 trillion and 500 billion yuan, plus the funds to be released by the upcoming medium-term credit facility operation and the dynamic assessment of universal finance. Then, considering the factors that will not be continued in the first half of this year, the net release of long-term capital will be about 800 billion yuan.

The full text is as follows:

The people's Bank of China decided to reduce the deposit reserve ratio of financial institutions in January 2019 to replace part of the medium-term lending facilities.

In order to further support the development of the real economy, optimize the liquidity structure and reduce the cost of financing, the people's Bank of China decided to reduce the deposit reserve ratio of financial institutions by 1 percentage points, of which 0.5 percentage points were cut in January 15, 2019 and January 25th respectively.

Meanwhile, the medium-term credit facility (MLF), which is due to expire in the first quarter of 2019, will no longer be renewed.

This arrangement can basically hedge the Liquidity Fluctuation Caused by cash input before the Spring Festival this year, which will help financial institutions continue to increase their support for small and micro enterprises and private enterprises.

At present, China's economy continues to develop healthfully and its economy is running in a reasonable range.

The people's Bank of China will continue to implement prudent monetary policy, maintain moderate tightness, do not carry out flood irrigation, pay attention to directional regulation and control, maintain a reasonable and abundant liquidity, maintain a reasonable growth in the scale of money and credit and social financing, stabilize the macro leverage ratio, balance the internal and external balance, and create an appropriate monetary and financial environment for high-quality development and supply side structural reform.

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People's Bank of China responsible person said: quasi replacement medium term lending convenience to support the development of the real economy.

1, how much money will be released in the interim loan?

A: the release of funds will be about 1 trillion and 500 billion yuan, plus the funds to be released by the upcoming medium-term lending convenience operation and the dynamic assessment of universal financial orientation. After considering the factors that will not be continued in the first half of this year, the net release of long-term funds will be about 800 billion yuan.

2, does it mean that the orientation of prudent monetary policy has changed?

Answer: this reduction is still a directional regulation, not flood irrigation, stable monetary policy orientation has not changed.

The implementation of the quasi reduction policy is implemented in two stages, which is compatible with the rhythm of cash supply before the Spring Festival. It is conducive to maintaining a reasonable balance of the total liquidity of the banking system, and taking into account the internal and external equilibrium. It helps maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

3, how to support the real economy?

Answer: the RRR and related operations have released about 800 billion yuan of long-term incremental funds, which can effectively increase the sources of loans for small and micro enterprises and private enterprises.

In the interim, the loan convenience can also directly reduce the interest cost of the related banks by about 20 billion yuan per year, which is conducive to the real economy to reduce costs through the pmission of banks.

All these are conducive to supporting the development of the real economy.