In an article, a PBoC official said that adjustment in the reserve requirement ratio was for providing “long-term, stable liquidity” to the real economy. It’s not a sign towards loose monetary policy. The article was first published in December, released again by the China Bond magazine via it’s Wechat account yesterday. that came a day after PBoC announced fresh RRR cut on Wednesday.
Ruan Jianhong, head of the Statistics and Analysis Department at the People’s Bank of China (PBOC), said, “from an international perspective, China’s current required reserve ratio (RRR) is still relatively high and has relatively big room to adjust”. Along with other monetary policy tools, RRR adjustments “can provide long-term, stable liquidity to the real economy.”
“In recent years, PBOC has been reducing RRRs successively. But this doesn’t mean PBOC is shifting toward a looser monetary policy. Rather, the moves are aimed at supplementing liquidity to the overall economy in an efficient, low-cost manner,” She added.
