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China will cut the amount of cash banks must hold to support smaller businesses, Prime Minister Li Keqiang said Friday, but did not say when the cut would take place.
China will continue to pursue prudent monetary policies, keep liquidity adequate, make policies based on market participants’ needs, and lower the reserve requirement ratio at an appropriate time, Li said at a meeting with International Monetary Fund chief Kristalina Georgieva on Friday. The authorities will increase support to the real economy, especially small and medium-sized enterprises, to ensure stable and healthy operations, he said, according to Chinese state television.
Li also said China will continue to coordinate pandemic controls with economic and social development, continue to implement stable macroeconomic policies while making them more targeted and effective.
The economy has come under increasing pressure from a deepening real estate market slump this year, but so far the authorities have been reluctant to introduce new support policies, have kept the banks’ RRR unchanged since July and maintained a moderate pace of government spending. Recently, however, officials have stepped up support for small businesses and areas like green technology and manufacturing.
The People’s Bank of China signaled easing in its last monetary policy report last month, while the State Council urged local governments to accelerate spending. Li’s comments suggest the central bank is trying to increase support further, although it is unclear how much money a decision would actually free up for additional lending, or when it would happen.
The RRR’s final cut in July came two days after the State Council announced it was considering the option, freeing up about 1 trillion yuan ($ 157 billion) of liquidity into the economy, the People’s Bank of China said at the time.
Li also said China stands ready to deepen its cooperation with the IMF and hopes the IMF will continue its reforms and help developing countries fight and recover from the pandemic. Li is due to speak to IMF Georgieva again next Monday at an annual meeting between China and six international organizations, including the World Bank and the World Trade Organization.
(Updates with further details continuously.)
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