China reduces bank reserve requirements by 50 basis points

China has pledged to reduce the amount of liquidity its banks must hold in reserves early next month as it attempts to boost its faltering economy.

The Chinese central bank said it expects rapid credit growth in the first quarter. Pan Gongsheng, governor of the People’s Bank of China, said that reserve ratio requirements for banks will be reduced by 50 basis points from February 5, which will save 1 trillion yuan of long-term capital.

This comes after China on Monday pledged to “enhance inherent market stability” amid turmoil in the country’s onshore and offshore stock markets.

It is noteworthy that the Chinese economy is fraught with financial risks, as some of the largest real estate developers face serious debt problems at a time when Beijing seeks to reduce its debt in the previously bloated real estate sector.

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