8tn yuan injected via 12 RRR cuts

Business | Agencies and Stella Zhai 26 May 2020

The People's Bank of China said the average reserve requirement ratio among mainland lenders was 9.4 percent as of mid-May, about 5.2 percentage points lower than 2018, while 8 trillion yuan (HK$8.7 trillion) has been injected into the market through 12 RRR cuts in the past two years.

Meanwhile, the National People's Congress plans to revise the PBOC law this year, Bloomberg reported. Media reports said some NPC delegates suggested the central bank strengthen its role in risk management and policing of financial institutions.

The PBOC yesterday set the official yuan midpoint at 7.1209 yuan per US dollar prior to the market opening, the weakest since 2008, reflecting losses in the spot yuan after Beijing's proposal of a national security law for Hong Kong.

But onshore yuan rallied 28 basis points to close at 7.1388 per US dollar.

In other news, UBS maintained its forecast for China's economic growth at 1.5 percent for 2020 and predicted the government would step up specific stimulus.

Head of Asia economics and chief China economist Wang Tao predicted the economy would rebound this quarter but year-on-year GDP growth would remain negative. The institution forecast GDP growth would reach 5 to 6 percent in the second half and 7.5 percent next year, given a lower base.

Wang did not expect a huge systematic risk in China's financial system given a very high saving rate and ample liquidity provided by the central bank.

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