China cuts reserve requirement ratio for banks

China cut the reserve requirement ratio that banks must hold on Friday, in a move that will allow it to pump about $142.6 billion in liquidity into financial markets.

The reserve requirement ratio is a percentage of deposits that banks are not allowed to dispose of but are kept by the central bank.

This reduction, which the Chinese central bank announced on Tuesday, comes the day after a meeting held by Chinese leaders during which they acknowledged the existence of new “problems” in the country’s economy.

The head of the Chinese central bank announced that Beijing will take measures to stimulate the economy, most notably reducing the reserve requirement ratio and lowering the main interest rate and the interest rate on mortgages.

Chinese authorities still expect growth of 5% this year, but analysts consider this goal very optimistic given the many obstacles facing the economy.

The country is suffering in particular from a crisis in the real estate sector, high unemployment rates among young people, and slowing household consumption.