China Still Has Plenty of Savings to Unleash
Even with the cut to its reserve requirement ratio this week, China has about $3.7 trillion to lock away
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The People’s Bank of China lowered banks’ required reserve ratios on Monday, making the largest cut since Nov. 2008. Even so, they still have about 23 trillion yuan ($3.7 trillion) to lock away, begging the question: how much will be allowed to flow into the nation’s slowing economy and boost lending?
The RRR, as the level is known, is one of the key levers the central bank uses to manage liquidity in the world’s second-largest economy. When overseas capital flows in and consumer prices are rising, up goes the RRR; when money exits and inflation is tame, down it can come, as it did Monday to 18.5 percent for the biggest lenders.