China’s cabinet to use RRR cuts to support real economy


© Reuters. FILE PHOTO: People walk along Nanjing Pedestrian Road, a main shopping area, in Shanghai, China May 5, 2021. REUTERS/Aly Song

BEIJING (Reuters) – China will use timely cuts in the bank reserve requirement ratio (RRR) to support the real economy, especially small firms, state media quoted the cabinet as saying on Wednesday.

The central bank has been trying to cool credit growth to curb debt risks, keeping borrowing costs low and telling banks to maintain support for small firms.

China will “use monetary policy tools, including RRR cuts, in a timely way to further step up financial support for the real economy, especially small firms”, the cabinet was quoted as saying in a regular meeting.

China will lower financing costs for small companies to help them cope with rising commodity prices, it added.

The country will keep its monetary policy stable while increasing policy effectiveness, but will not resort to “flood-like” stimulus, state media said.

China should guide market interest rates lower to support economic growth and ease funding pressure on local governments, a former central bank official said.

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