China’s central bank announced Friday that it will cut the amount of money that banks have to hold in reserve, releasing a net 800 billion yuan ($116.5 billion) into the financial system to ensure an ample supply of cash ahead of the Spring Festival holidays.
The People’s Bank of China (PBOC) plans to cut the reserve requirement ratio (RRR) twice this month, once on Jan. 15 and once on Jan. 25, for a total reduction of 100 basis points.
"The cut should be seen as a targeted adjustment, rather than flooding the financial system," the PBOC said in a separate explanatory filing that emphasized it was not altering the "moderate stance" of China’s monetary policy.
The central bank’s announcement came just hours after Premier Li Keqiang promised to cut the RRR and lower taxes and fees to help the country’s small and private firms.