RRR cut more reasonable than expected

With a liquidity injection of 559 billion yuan ($81.59 billion) via one-year medium-term lending facility loans so far this year and the comments made by Yi Gang — governor of the People's Bank of China, the central bank — before the two sessions saying that "the current level of some key variables concerning monetary policy is appropriate", the market actually had weaker expectations for cuts in the reserve requirement ratio over the short term. But under such a scenario, the PBOC announced on March 17 an RRR cut of 0.25 percentage point for financial institutions starting today.

The latest move was somewhat unexpected for many, though it is a move that makes sense in several aspects.

Key stabilizing move