by Stella Qiu and Kevin Yao
BEIJING (Reuters) – The People’s Bank of China (PBOC) said on Friday it would cut the reserve requirement ratio for banks for the first time this year in a move aimed at supporting the economy.
Risks related to the war in Ukraine, the resurgence of the COVID-19 epidemic in China and the weakness of the real estate market weigh on the world’s second largest economy and its supply chains.
China’s exports, a key growth driver for the country, are showing signs of weakness and some economists believe the risk of recession is growing.
The People’s Bank of China announced that starting April 25, the reserve requirement ratio (RRR) would be cut by 25 basis points for all banks.
“I don’t think this measure is very important for the economy at this stage,” commented Zhiwei Zhang, chief economist at Pinpoint Asset Management, who considers the extent of the rate cut insufficient.
“The main challenges facing the economy are the COVID-19 outbreak due to the Omicron variant and containment measures. More liquidity may help at the margins but it does not address the root of the problem,” he added.
The cut in the reserve requirement ratio for banks was widely expected by markets after Chinese authorities said on Wednesday that they would in due course use the instruments at their disposal to support the economy.
(Report Stella Qiu, Kevin Yao and the Beijing office, French version Laetitia Volga, edited by Bertrand Boucey)
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