China RRR Cut Gives Bigger Growth Boost Than Rate Move
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China’s economic growth will get a bigger boost if the central bank cuts the reserve requirement ratio for banks rather than interest rates, according to research from Bloomberg Economics.
The growth rate could be lifted by 0.3 percentage point this year if the central bank reduces the reserve ratio — or the amount of cash that lenders must keep in reserve — by 25 basis points in the second quarter, Bloomberg Economics said in a report Thursday. A cut of that magnitude would add 500 billion yuan ($71 billion) worth of liquidity to banks, which they can use to increase loans.