China boosts SME lending with reserve cut as markets fall on trade fears

In an aim to lift the sagging economy, China’s central bank said Monday that it will cut the reserve requirement ratio (RRR) for small- and medium-sized banks, freeing up around RMB 280 billion (around $41.4 billion) for loans to the country’s startup companies and private businesses.

The People’s Bank of China (PBOC) said for county-level rural banks with assets below RMB 10 billion ($1.5 billion), the RRR will be reduced to 8%. This is in line with the rate at rural credit cooperatives (RCCs), a credit union sanctioned by the PBOC to provide credit in rural areas to support agriculture that has been in place since the 1950s.

Authorities expect the new policy, starting May 15, will be applicable to around 1,000 small banks, and will release RMB 280 billion ($41.5 billion) in long-term funds into the market. “All the funds unlocked will be loaned to private and small companies,” the statement said.

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