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23 Apr 2014
Details of RRR cut for rural banks unveiled - Nomura
FXStreet (Bali) - Zhiwei Zhang, Economist at Nomura, notes that Tuesday's decision by the Chinese government on RRR cuts for rural banks only bolsters the bank's view of a cut across the board in Q2.
Key Quotes
"The People's Bank of China (PBoC) announced Tuesday a 200bp cut in the reserve requirement ratio (RRR) for rural commercial banks and of 50bp for rural cooperative banks (effective 25 April). The State Council had already said at its 16 April meeting that the RRR for these banks would be cut, but the extent of the cuts was not released until Tuesday."
"We estimate the amount of liquidity released to be RMB80-90bn, which is still small and effectively insignificant given the size of the economy, but the move does serve to send the signal that the government is more concerned about the economy as growth slows."
"This move reinforces our view that the PBoC will cut RRR for all banks in Q2. If it does so, the liquidity released would be significant at around RMB550bn, by our estimates."
Key Quotes
"The People's Bank of China (PBoC) announced Tuesday a 200bp cut in the reserve requirement ratio (RRR) for rural commercial banks and of 50bp for rural cooperative banks (effective 25 April). The State Council had already said at its 16 April meeting that the RRR for these banks would be cut, but the extent of the cuts was not released until Tuesday."
"We estimate the amount of liquidity released to be RMB80-90bn, which is still small and effectively insignificant given the size of the economy, but the move does serve to send the signal that the government is more concerned about the economy as growth slows."
"This move reinforces our view that the PBoC will cut RRR for all banks in Q2. If it does so, the liquidity released would be significant at around RMB550bn, by our estimates."