Adviser urges RRR cut

Finance | Bloomberg and Reuters 20 Oct 2021

China's central bank has room to cut the amount of cash banks must hold in reserve in order to boost liquidity and support economic growth, a government adviser said.

The reserve requirement ratio "can be lowered by 1 percentage point in the fourth quarter," said Yao Jingyuan, a special researcher at the Counselor's Office of the State Council, which provides research and advice to the cabinet.

"We don't need to worry about whether releasing more money will push inflation higher because we still have room," Yao told reporters Monday, according to an online transcript of a briefing. His comments about a RRR cut were later removed from that document.

Recent remarks from People's Bank of China officials suggest they can manage financial risks and don't see the need for significant stimulus despite a sharp slowdown in the economy. That prompted some analysts to dial down their expectations for a RRR cut in the coming weeks and months.

Meanwhile, the yuan surged yesterday to a four-month high, aided by market expectations that the stresses in the domestic property sector as well as Sino-US tensions are easing.

The onshore spot yuan opened at 6.4250 per dollar and strengthened past the psychologically important 6.4 before ending at 6.3998, the strongest such close since June 16 and 296 pips firmer than the previous late session close.

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