A visitor looks at an automatic robot during the World Intelligent Manufacturing Summit (WIMS) 2018 in Nanjing, east China's Jiangsu Province, Oct. 11, 2018.
BEIJING, Dec. 8 (Xinhua) -- Chinese central bank's required reserve ratio (RRR) cut from December 15 is expected to better support the economy and may spur investment opportunities from further recovery of profitability of listed manufacturers, reported Xinhua Finance citing China Merchants Fund Management Co., Ltd. Tuesday.
On Monday, Chinese central bank announced that from December 15, Chinese banks, excluding those that already enjoy the five percent RRR, are granted a 0.5 percent RRR reduction, which will bring average weighted RRR of financial institutions down to 8.4 percent and unlock around 1.2 trillion yuan of long-term capital.
As China Merchants Fund held, Chinese central bank took the move to keep liquidity reasonably fluid and effectively increase stable long-term capital sources for the real economy. It also targeted guiding financial institutions to actively utilize capital unlocked by the RRR cut to expand supports to the real economy, in particular the small- and medium-sized enterprises. By the RRR cut, financial institutions can save capital costs of 15 billion yuan every year, which in turn will help reduce the social financing costs.
After the RRR cuts in July and December, there might be more policies to reduce the financing costs of the real economy in future. Commercial banks can contribute to reduction of the real economy financing costs via narrowing down the spread added to the loan prime rates (LPR), market-based benchmark lending rates.
In the short term, the Chinese central bank's RRR cut signaled attempts to stabilize the economy. Amid the downward running of the producer price index (PPI), China Merchants Fund expressed optimism towards the investment chances hidden in the further profitability recovery of listed manufacturers and in advanced manufacturing sectors that are supported by related policies in the long run.
Moreover, industries significantly hampered by the COVID-19 may post encouraging performances when the pandemic was gradually brought under control, China Merchants Fund said. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)
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