China to Cut Banks’ Reserve Requirements Amid Flagging Recovery

What’s new: China will reduce banks’ reserve requirement ratio (RRR) by 50 basis points on Feb. 5, central bank Governor Pan Gongsheng said at a news briefing on Wednesday.

The move, which Pan said will release 1 trillion yuan ($141 billion) of liquidity into the financial system, is aimed at providing additional stimulus to the economy, analysts said.

“Compared with the central banks of major international economies, there is still considerable room for adjustment,” Pan said, noting that the current average level of the RRR is 7.4%. “This serves as an effective tool to supplement the medium- and long-term liquidity in the banking system.”