Further RRR cuts predicted in short term: experts
Published: Dec 24, 2019 09:18 PM

Headquarters of the People's Bank of China, China's central bank, in Beijing in October 2018 Photo: IC

Further cuts in China's overall and targeted required reserve ratios (RRRs) are likely in the short term, possibly at the coming weekend, experts said after Premier Li Keqiang said that multiple measures will be considered to ease financing pressure on small businesses.

Li said the measures might include RRR cuts, as well as re-lending and rediscount.

Such moves could ease pressure during the upcoming peak season for capital demand in the New Year and Chinese Spring Festival, and keep reducing financing pressure of small businesses so as to boost economic growth, experts told the Global Times on Tuesday.

With a basic tone of stability, China has been taking a more flexible and targeted monetary policy to manage market supply and demand, as well as to offer support for economic growth, Zhao Xijun, vice director of the School of Finance at Renmin University of China, told the Global Times.

It is expected that RRRs would be further cut in the short term, in a bid to ease the escalating capital demand of businesses and other institutions in the holidays peak season, Zhao noted.

The expected RRR cuts could also supply liquidity for the issuance of special bonds and other debt issues at the beginning of 2020, according to a report from the Bank of Communications on Tuesday.

Addressing market expectations that RRR cuts may be announced on Friday, Liu Xuezhi, a senior economist at the Bank of Communications, agreed on such a possibility and noted that China has been stepping up efforts to ease the difficulties of businesses' financing issues, especially for small businesses. 

Given that private businesses have been major forces in boosting the economic growth of China, further cuts in RRRs would also be in line with the economic strategy of China to stabilize employment and keep boosting economic growth next year, Liu told the Global Times.

It would be a long-term trend for China's monetary policy to be more flexible and targeted against the backdrop of the increasing complex global and domestic capital markets, Zhao noted.

China's benchmark Shanghai Composite Index closed 0.67 percent higher at 2,982.69 points, while the Shenzhen Component Index rose 1.32 percent to close at 10,189.29 points on Tuesday.