Editor’s Note: China’s central bank will cut the reserve requirement ratio for financial institutions by 0.5 percentage point and an additional 1 percentage point for some urban commercial banks from Monday. 21st Century Business Herald comments:
At a time when the Chinese economy is facing growing downward pressure due to numerous domestic and global factors, it is necessary for the monetary authorities to provide reasonable and abundant liquidity for the market in order to reduce the financing costs of enterprises and support the real economy.
The latest RRR cut, which to some extent is a hedge against the mid-September tax period, does not mean China will change its prudent monetary policy. But given the economic slowdown, China should guard against the excessive pursuit of “good assets” by releasing too much liquidity.