PBoC discloses additional liquidity to banks obtained through reducing the bank’s cash reserve limit at PBoC. The plan, China’s central bank will cut the cash reserve limit by 100 basis points (bps) in two stages.
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First, on April 15, 2020. Second, on May 15, 2020. In addition, the PBoC will also cut interest rates paid on excess bank reserves.
This policy will enable banks to hold more cash, so that they can be channeled to Micro, Small and Medium Enterprises. The target, this policy reaches around 4,000 small banks in China.
Decreasing the cash reserve limit will prioritize small-scale banks in rural areas and urban commercial banks that only have operations at the provincial level. This is the first time this policy has been implemented by PBoC in the last 12 years.
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“The aim is to effectively increase funding sources that are stable and help reduce the interest rates charged by bank companies.” a PBoC spokesman was quoted as saying by AFP on Friday (3/4).
This step complements a number of policies previously issued during the Corona pandemic to maintain bank liquidity. While PBoC said the production operations of a number of large-scale companies had started to run normally thanks to the stimulus provided.
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In fact, the country with the second largest economy in the world had imposed a halt to industrial activity due to the corona pandemic. Based on Johns Hopkins University data.
Positive cases of the corona virus in China have slowed with accumulations reaching 82,509 cases on Friday (3/4). Of that number, 76,760 people recovered and 3,326 people died, so the death ratio due to the corona virus in China was 4.03 percent.
