China’s Li Vows More Funding with Targeted Reserve-Ratio Cuts

(Bloomberg) -- Chinese Premier Li Keqiang said the government will continue to lower the amount of money banks put aside as reserves to reduce overall borrowing costs for small firms, according to China Central Television.

Li said the government will continue to cut the reserve ratio for banks and look into measures including increasing quotas for relending and rediscounting to reduce overall borrowing costs for small firms and increase the amount of cheap funding to commercial lenders. He made the remarks during a visit to local commercial lenders in Chengdu on Monday.

The comments are in line with market expectations that the People’s Bank of China will increase funding to the financial system in January to ease a possible liquidity crunch caused by rising local government debt sales and increasing cash demand during the Spring Festival holidays. Previously, the premier’s pledges on reserve-ratio cuts have preceded the PBOC’s actions by a couple of weeks.

To contact Bloomberg News staff for this story: Dong Lyu in Beijing at dlyu3@bloomberg.net;Yinan Zhao in Beijing at yzhao300@bloomberg.net

To contact the editors responsible for this story: Charlie Zhu at qzhu46@bloomberg.net, Allen Wan

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With assistance from Bloomberg