On February 25th, China’s monetary policy framework is in a period of gradual weakening of quantitative targets and increasing emphasis on the role of interest rate regulation. The adjustment of the reserve requirement ratio, which has frequently appeared in monetary policy operations in the past, may gradually become “low-key”. Especially recently, the People’s Bank of China mentioned in the latest monetary policy implementation report in the form of a column that “further improve the deposit reserve system”, triggering the market’s speculation that the deposit reserve system is about to usher in reform again. At present, China’s statutory reserve requirement ratio includes three levels: large, medium, and small banks, which are 8%, 6%, and 5% respectively, with an average reserve requirement ratio of 6.6%. Among them, the reserve requirement ratio for small banks has been reduced to 5% in 2021, and since then, the reserve requirement ratio for small banks has not been adjusted. Therefore, it has also been interpreted by the outside world as “5% is the hidden lower limit of China’s statutory reserve requirement ratio”. However, as the People’s Bank of China said, “the practice of adjusting long-term liquidity through deposit reserve can see that the level of deposit reserve ratio has no absolute advantages or disadvantages”, and 5% is not insurmountable. (Securities Times)
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