Q: How much fund will be released through this round of reserve requirement ratio (RRR) cut to replace medium-term lending facilities (MLF)?
A: The RRR cut will release a total of nearly RMB 1.5 trillion. Moreover, as the upcoming targeted MLF operation and the dynamic assessment of targeted RRR cuts for financial inclusion will also free up some funds, and the outstanding MLFs due to mature in the first quarter of this year will not be renewed, a net of approximately RMB 800 billion of long-term capital will be released.
Q: Does the RRR cut imply any change in the prudent monetary policy stance?
A: The RRR cut is another round of targeted adjustment instead of massive liquidity injection, so it does not imply any change in the prudent monetary policy stance. This round of RRR cut will be implemented in two steps, to keep pace with the cash injections that might emerge in the run-up to the Spring Festival and help maintain total liquidity reasonably adequate in the banking system. Meanwhile, the RRR cut strikes a balance both internally and externally, and enables the RMB exchange rate to remain broadly stable at an adaptive and equilibrium level.
Q: How will this round of RRR cut support the real economy?
A: This round of RRR cut and relevant operations will release an additional net of approximately RMB 800 billion of long-term capital, thereby effectively increasing loan funding sources for small and micro businesses, private enterprises and other entities in the real economy. Meanwhile, the replacement of MLFs will directly reduce interest payments of banks by around RMB 20 billion each year, and thus enable lower costs in the real economy by bank transmission. All these impacts will help support the development of real economy.
