The People’s Bank of China has decided to cut the reserve requirement ratio (RRR) for Chinese banks by 0.5 percentage points effective as of May 15. This will release RMB 1 trillion ($0.14 trillion) in long-term liquidity into the market.
Meanwhile, from May 8, the open market seven-day reverse repurchase operation rate will be adjusted from the previous 1.5 percent to 1.4 percent, down 20 basis points. This move may lead to a decline in the loan prime rate (LPR) next month.
Pan Gongsheng, governor of the PBOC, stated during a press release at the State Council Information Office on May 7 that the interest rate for individual housing provident fund loans will be lowered by 0.25 percentage points as of May 8, signaling that the interest rate for loans for first house purchases with a maturity of five years or more will be lowered from 2.85 percent to 2.6 percent. This will reduce the pressure on home buyers and release spending power to a certain degree.