Commentary
The People’s Bank of China (PBoC) cut the required reserve ratio (RRR) by 25 basis points (bps) for all financial institutions. The mouthpiece claimed a release of 500 billion yuan (or over 70 billion U.S. dollars) in just one cut, but if this had been the case, then the trillion-debt crisis would have been resolved easily with a series of few more cuts. RRR cut is nothing but the removal of banks’ lending limits. Nevertheless, the problem now is not hitting the lending ceiling, that is, not a lack of loan supply; rather, it is the loans demand that has been too weak.
