The People's Bank of China recently announced it would cut the reserve requirement ratio (RRR)—the amount of cash that financial institutions must hold as reserves this year—by 0.25 percentage points beginning March 27 to maintain ample liquidity reserves in the banking system.

Analysts said banks will now can enhance their ability to expand credit.

The decision is intended to boost economic growth momentum after investment stabilised and consumption rebounded in the first two months this year, state-controlled media outlets reported.

After the reduction, the weighted average RRR for lenders, except those already implementing a 5-per cent ratio, will fall to around 7.6 per cent.

With 268.2 trillion yuan ($39 trillion) of deposits in Chinese banks at the end of February, the cut will unleash around 600 billion yuan of medium- and long-term liquidity, Bruce Pang, the Greater China chief economist of real estate and investment management services firm JLL, said.

The country's retail sales reversed a three-month downward growth in January and February combined, and its industrial output also picked up pace from December. Other economic indicators, including fixed-asset investment and the services production index, also posted year-on-year growth.

Fibre2Fashion News Desk (DS)

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China to cut RRR by 0.25 percentage points from Mar 27