China to Cut Reserve Requirement Ratio by 0.5 Percentage Points

BEIJING, May 12 (Xinhua) -- China will lower banks' reserve requirement ratio (RRR) by 0.5 percentage points starting May 18, the country's central bank announced Saturday.

The cut, the second of its kind this year, will drop the RRR for the country's large financial institutions to 20 percent and the medium- and small-sized financial institutions to 16.5 percent, according to the People's Bank of China.

Analysts say the central bank's move is to further release liquidity against the backdrop of current slowdown in economic growth.

The cut will release an estimated 400 billion yuan (63.49 billion U.S. dollars) in capital into the market.

China had previously lowered the RRR by 0.5 percentage points on Feb. 24.

"From the April economic data released recently, we can see that China's foreign trade, investment, tax revenue and credit have all showing signs of slowdown in growth," Lian Ping, chief economist of Bank of Communications, told Xinhua.

"The central bank lowers the RRR now with a view of releasing additional liquidity and strengthen the market vitality," he said.

The central bank in December cut the RRR by 0.5 percentage points for the first time since December 2008, after hiking the RRR six times last year in an effort to check inflation.