China joined other nations in offering more monetary support to economy as the economic growth slows and factory output growth struggles.
People’s Bank of China lowered at least 50 basis points reserve required by banks to improve liquidity as capital outflow accelerates and economic growth slows.
The latest cut will allow banks to have only 19.5% in reserves and some banks active in rural areas and lend to small businesses will be able to decrease ratio in certain conditions as low as 19%.
At least ten central banks around the world from Japan, India, Turkey, Canada and the euro zone have offered monetary support to the economy this year after commodities prices extended losses and oil dropped to a five-year low.
The required reserve ratio, or RRR, is cut for the first time since May 2012 and the latest move is expected to inject as much as 630 billion yen or $98 billion to the economy according to an estimate from several economists in Shanghai and Hong Kong.
According to data available from Chinese government agencies and central bank, capital outflow picked up to highest level in fifteen years last quarter.