China Securities Journal with today’s article quoting analysts – They say the People’s Bank of China’s (PBOC) third-quarter reserve requirement ratio (PBOC) is likely. In order to give a boost to the economy.
The Reserve Requirement Ratio (RRR) is a regulation of the central bank that specifies the minimum amount of reserves each bank must hold in relation to its deposit liabilities. It is the percentage of total deposits that banks are legally required to keep on hand, either in cash in their vaults or in a reserve account at the central bank.
In China, this ratio is set by the People’s Bank of China (PBOC).
By adjusting the requirements of the central bank, the People’s Bank of China (PBOC) can influence the lending capacity of commercial banks. For example, an increase in the interest rate in equity means that banks have less money to lend because they have to hold more in reserve. This reduces the money supply in the economy.
Conversely, if the People’s Bank of China (PBOC) lowers the reserve ratio, the banks have more money to lend because they are required to hold less reserves. This increases the money supply in the economy, which can stimulate economic activity.
