PBOC Adviser Sees Stable China Liquidity After Reserve Ratio Cut

Overall liquidity condition in the Chinese market will remain basically stable after the People’s Bank of China’s move to lower the amount of cash most banks must hold in reserve, a policy adviser to the central bank said.

The liquidity unleashed from the reserve ratio cut can offset the impact from the maturity of medium-term loans, government bond sales and tax payments, policy adviser Wang Yiming said in an interview with the PBOC-backed Financial News. The cut will take effect from July 15, the central bank said Friday.

Wang reiterated there is no change in the PBOC’s prudent monetary policy, and the reserve ratio reduction is “a conventional liquidity operation” after a normalization of its monetary policy. Liquidity in China’s banking system will remain reasonably ample after the cut, Wang said.

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