The People’s Bank of China said it would cut the required reserve ratio by one percentage point, effective from October 15, as a way of ensuring “reasonable growth” in credit.
The easing, announced on the last day of China’s week-long National Day holidays, came at a time when the world’s second biggest economy is losing momentum amid an intensifying trade war with the US, South China Morning Post reported.
At the same time, China is facing growing capital outflow pressure as the US Federal Reserve is raising interest rates.
According to the Chinese central bank, Chinese banks can receive 1.2 trillion Yuan from the one percentage point cut in required reserve ratio, in which 450 billion Yuan (US$65 billion) will be used to repay their existing borrowing from the central bank and the other 750 billion Yuan (US$110 billion) can be used to lend.