PBOC Extends Easing Measures in Order to Shore up Ailing Economy

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The Central Bank of China decided to lower reserve requirement ratio for small and medium-sized commercial banks unlocking about 400 billion yuan ($ 56.38 billion) of liquidity to shore up the economy damaged by costly lockdowns.

The People’s Bank of China said on its website that it would reduce the required reserve ratio for banks by 100 basis points in two stages. First decline by 50 bp will take effect on April 15, and the second – by another 50 bp – from May 15.

In addition, from April 7, the interest rate on excess reserves of financial institutions in the central bank will be reduced to 0.35% from 0.72% to stimulate banks to earn by issuing more loans. The central bank has been easing monetary policy since the outbreak of coronavirus epidemic in January, lowering the base lending rate and urging banks to offer cheap loans and payment benefits to companies most affected by the outbreak of coronavirus.

Economists forecast sharp decline of China GDP in the first quarter, with some expecting the country’s output to plunge by as much as 9% YoY – the first such decline in three decades.

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