China Cuts Reserve Ratio by 50bp to Boost Economy
PBOC cut RRR releasing 1 trillion yuan.
The People's Bank of China announced a 50 basis point reduction to the reserve requirement ratio for most commercial banks, effective immediately, in the most aggressive monetary easing move since the pandemic era. The cut is expected to release approximately 1 trillion yuan ($138 billion) in liquidity into the financial system, providing banks with additional capacity to extend credit.
The decision comes after first-quarter GDP growth disappointed at 4.2%, falling below the government's full-year target of 5% and marking the weakest expansion since early 2023. Property sector investment contracted for the 22nd consecutive month, while consumer spending grew at just 3.1%, well below pre-pandemic trends. Youth unemployment remained elevated at 15.3%.
The CSI 300 index jumped 2.1% on the announcement, with property developers Country Garden and China Vanke rallying 5-7% as investors bet on improved financing conditions. The yuan weakened slightly to 7.28 per dollar as markets priced in further easing measures. PBOC Governor signaled that additional tools, including potential benchmark rate cuts, remain available if the economic recovery fails to gain traction in the second quarter.
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