China to cut reserve requirements for small banks

China’s central bank said yesterday it would cut the amount of cash that small and medium-sized banks hold in reserve in Beijing’s latest move to boost the stuttering economy. Authorities will slash the reserve requirement ratio (RRR) on May 15, with the aim of lowering financing costs for small businesses, the People’s Bank of China said in a statement.

For county-level rural banks with limited scope, the RRR will be cut to eight percent, in line with the rate at rural credit cooperatives. Roughly 1,000 banks will benefit from the action, unlocking 280 billion yuan ($41.6 billion) for lending to small private companies, the central bank said. It is the second such move this year as China seeks to blunt the impact of a weakening economy and slowing global demand for its exports.

The move comes as Donald Trump on Sunday threatened to raise tariffs on hundreds of billions worth of Chinese goods at the end of the week, throwing a spanner in trade talks that had appeared on track to conclude soon. Beijing’s top policymakers outlined a looser monetary policy during parliamentary meetings in March with Premier Li Keqiang pledging China would reduce the amount of cash banks must keep in reserve to support growth.