China’s State Council announces targeted RRR cuts for agriculture, SMEs

BEIJING – China’s State Council has announced that it will lower the reserve requirement ratio (RRR) for banks engaged in lending to the agricultural sector and small and micro-sized enterprises (SMEs), but did not detail when and by how much it will cut. The Council said that it will allocate financial resources to support vital State projects, companies' upgrading efforts, and service sectors.

As the Government seeks to meet an official expansion target of about 7.5% this year, Beijing has been enacting small stimulus measures to ensure growth, including boosting support for small businesses, and speeding up spending of budgeted funds. Analysts said the targeted move indicated that broad-based RRR reductions for banks are unlikely in the near future.

The RRR sets the minimum fraction of customer deposits that each bank must hold as reserves rather than lending, and is an important monetary tool used by central banks. Lowering the RRR is often aimed at boosting bank lending to shore up economic growth.