The People’s Bank of China has decided to ease the reserve requirement ratio criteria for small and micro-sized enterprises, in hopes of boosting lending to these companies, The Economic Observer reported.
Small and micro-sized companies with a credit line of less than 10 million yuan (US$1.46 million) will be able to take advantage of reserve-requirement ratio cuts, compared to the previous standard of 5 million yuan, said the PBOC in a statement .
The central bank said this will help expand coverage of its preferential policies and guide banks to better meet the credit demand of small companies.
Liao Zhiming, an analyst at Tianfeng Securities, expects the move will release about 600 to 700 billion yuan in liquidity.
This RRR standard adjustment has also triggered the market’s expectation of further cuts. Zhang Yu, a research director at Huachuang Securities, thinks there could be an RRR cut in mid-January.