China's central bank cuts banks' reserve ratio to bolster growth

China's central bank announced on Friday to cut the reserve requirement ratio of banks (ratio money lenders are required to keep aside as reserves) by 1 percentage point to inject cash into the economy to bolster growth.

The required reserve ratio for banks will drop by 0.5 percentage point on January 15 and a further 0.5 percentage point on January 25, the People's Bank of China said in a statement on its website.

The central bank also said that the Medium-term Lending Facility loans that would mature in the first quarter will not be rolled over but liquidity will be able to offset the funding shortage that usually occurs ahead of the Chinese Lunar New Year.

The cut will unleash a total of 800 billion yuan ($116.6 billion) liquidity into the market, according to the PBOC.

China cut the reserve requirement ratio for selected banks four times in 2018 and has recently introduced a targeted Medium-Term Lending Facility, a tool used to adjust liquidity, to supply lower-cost funding to banks so that they can lend the money out to support the real economy, such as small enterprises.