Execution of targeted RRR cut must be checked for accuracy

CHINA'S CENTRAL BANK will cut the reserve requirement ratio for small and medium-sized commercial banks operating in counties starting from May 15. Beijing Youth Daily comments:

After the cut, the RRR for about 1,000 rural commercial banks will be reduced from the current 10 percent to 11.5 percent level to 8 percent, which will release about 280 billion yuan ($41.23 billion), which is to be used to provide loans to micro and small companies, the bank said in a statement.

Compared with the previous RRR cut which injected into the market 1.5 trillion yuan, the second cut this year is on a much smaller scale and more targeted. The targeted RRR reduction is not only made for temporary market relief, but is also based on institutional considerations and long-term motivations to build an inclusive financial system and provide sustainable financing channels for medium-sized, small and micro enterprises. The released liquidity following the RRR cut, if used appropriately, will help solve the financing problems of micro, small and medium-sized enterprises.