No surprise as the PBOC waits until the Chinese New Year cash crunch to cut the RRR. The 50 basis point cut frees up about ¥500 billion yuan in potential credit, which is roughly equivalent to the size of Spring Festival liquidity injections in prior years.

WSJ: China Cuts Reserve Requirement Ratio
The People’s Bank of China cut by half a percentage point the amount of deposits set aside by commercial banks in case of financial trouble. The step effectively frees up about 500 billion yuan, or about $81 billion, in additional funds that banks can now lend out.
Central banks can't print borrowers. China's small and medium companies need credit, but they'll see very little of this credit. Banks are also facing rising NPLs and falling deposits:
As deposits decline, banks face pressure to either cut lending or find other, more-costly sources of funds.
Not a major move by the PBOC today.


  1. Wow, nothing positive at all on the RRR cut? Quite possibly the most bearish reporting on the planet as far as the Chinese economy. If their economy turns around in '15 you may have to re-write about 400 articles.

  2. If the economy rebounds without a major stimulus I will definitely be wrong. I expect the latest RRR cut will be be marginally effective like the mortgage move at the end of September, with effects fading after a couple of months.

    Long-term I remain bullish on China. The current leadership is very good, but they're stuck with the policy mistakes of their predecessors.