China's central bank pumps liquidity to boost banking

A state-owned Chinese newspaper said on Saturday that China's central bank has made a timely move by pumping liquidity into the banking system to respond to rising pressures in the domestic banking industry and growing risks abroad.

The central bank reduced the amount of cash banks must hold as reserves for the first time this year to support a recovery in the world's second-biggest economy. Financial markets had anticipated a reduction in the reserve ratio earlier in the day.

In a front-page article, the People's Bank of China said the move will ease tension after demand for funds has increased as a result of the economic recovery. It said that the early release of liquidity will help prepare for the next stage of demand expansion.

The paper said that the external environment is becoming more complicated and the risks in the overseas banking industry are increasing.

The central bank has made a move to lower the reserve requirement ratio in order to bring long-term liquidity to the financial system, as the domestic banking industry's debt repayment costs are under pressure and the net interest margin continues to narrow to historical lows.

The cut reflected the Chinese government's responsibility to the world in not following the U.S. in raising interest rates, but sticking to an independent monetary policy, according to the Global Times, a state-controlled tabloid.

China's leaders pledged to raise support for the economy, which has rebounded from a pandemic-induced slump after COVID 19 curbs were abruptly lifted in December.

The global markets have been hit this week by the collapse of U.S. banks Silicon Valley Bank and Signature Bank and the uncertainty surrounding Credit Suisse Group AG, which tapped $54 billion in central bank funding.