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Less than Meets the Eye

Today’s announcement of a 50 bps cut to banks’ required reserve ratios (RRR) is primarily a political expression of China’s capacity to shore up growth, following the Shanghai G20 meeting’s focus on the slowing global economy, as well as a reaction to the liquidity tension building within Chinese money markets. With rapid credit growth in January and unprecedented bank asset growth in recent months, additional RRR cuts will still be limited due to concerns about the impact on the currency and capital outflows. Easing measures will continue to focus primarily on managing short-term interbank money market rates.

Posted August 1, 2017
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