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The People’s Bank of China cut the reserve requirement ratio (requirement ratio) of commercial banks. The decision is expected to provide about 500 billion yuan of liquidity to the market. According to the news agency on the 17th (local time), the People’s Bank of China decided to lower the reserve requirement ratio applied to commercial banks by 0.25 percentage points. It has been three months since the 0.25 percentage point cut in December last year. The reserve ratio is the percentage of cash that banks must leave with the central bank as reserves in case of emergencies. A decrease in the reserve requirement ratio reduces the amount of money that banks have to entrust to the central bank, which leads to a supply of liquidity in the market. The reduction in the reserve requirement ratio will take effect on the 27th, and is expected to have the effect of supplying approximately 500 billion yuan of liquidity. The People’s Bank of China said it aims to “maintain reasonable and sufficient liquidity and keep the rate of increase in the money supply in line with economic growth.” However, he said he would not be involved in excessive economic stimulus policies. In a press conference on the 3rd, People’s Bank of China Governor Lee Gang, who unexpectedly remained in office, said, “China’s real interest rate is at an appropriate level, and lowering the reserve requirement ratio of banks is still an effective way to support the economy,” despite the US policy rate hike. said. Since 2018, the People’s Bank of China has cut the reserve requirement ratio 15 times. In January and February of this year, China’s economic activity showed signs of recovering from the blow of Corona 19 thanks to consumption and infrastructure investment. However, exports, China’s traditional economic growth engine, are expected to show weak performance due to the global economic downturn and the blow to the real estate sector. China’s economic growth target this year has been set at around 5%, the lowest level ever. Reporter Cho Hae-young hycho@hani.co.kr