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People’s Bank of China reduces deposit reserve ratio

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Peoples Bank of China reduces deposit reserve ratio

It is reported that the People’s Bank of China has decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on March 27, 2023 (excluding financial institutions that have implemented a 5% deposit reserve ratio). After this reduction, the weighted average deposit reserve ratio of financial institutions is about 7.6%.

The People’s Bank of China has decided to reduce the deposit reserve ratio of financial institutions on March 27, 2023

Analysis based on this information:


The People’s Bank of China has made the decision to lower the deposit reserve ratio of financial institutions by 0.25 percentage points, effective March 27, 2023. This move is anticipated to boost lending and stimulate economic growth in the country. However, financial institutions that have already implemented a 5% deposit reserve ratio are excluded from this reduction, so their ratio will remain the same.

The deposit reserve ratio is the percentage of customer deposits that a bank must hold in reserve and is one of the primary tools used by central banks to control the supply of money in the economy. By increasing or decreasing the reserve ratio, a central bank can influence the amount of money that banks have available to lend or invest, ultimately affecting the growth of the economy.

The reduction in the deposit reserve ratio will provide financial institutions with more liquidity to lend, ultimately boosting economic activity. This move by the People’s Bank of China comes at a time when the country is working to recover from the economic impact of COVID-19 while also balancing the need to avoid inflation.

The weighted average deposit reserve ratio of financial institutions after the reduction will be approximately 7.6%, indicating that financial institutions will have more resources available to lend to customers. This can result in an increase in business investments and consumption, thereby supporting economic recovery.

Overall, this reduction in the deposit reserve ratio is a strategic move by the People’s Bank of China in supporting Chinese businesses and the economy at large. It indicates the government’s readiness to provide support where necessary while seeking to balance the need to prevent inflation.

Keywords such as People’s Bank of China, deposit reserve ratio, and financial institutions are essential in understanding this message’s context. With this move, the People’s Bank is providing an impetus for Chinese businesses to thrive and contribute to the country’s growth.

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