China's central bank reduced the country's RMB reserve requirement ratio (RRR) by 1 percentage point on Monday to substitute the medium-term lending facility (MLF) mature on the same day.
Various types of banks can enjoy the reduction, including big commercial banks, joint stock commercial banks, municipal commercial banks, non-county rural commercial banks and foreign banks.
A batch of MLFs worth about 450 billion yuan (65 billion U.S. dollars), was due to mature on Monday.
China's central bank said previously that part of the money released by the cut of the reserve requirement ratio would be used to repay the maturing MLFs on that day.
Apart from the money used to repay the matured MLFs on Monday, 750 billion yuan (108 billion U.S. dollars) liquidity will be injected, according to a report of the Economic Information Daily on Tuesday.
If no sharp fluctuation occurs in the exchange rate, the remainder of the injected liquidity resulting from the RRR cut after the repaying of the maturing MLFs will be sufficient to hedge the influence of the pay-in of the government bond issuances, among others.
This is the fourth time the central bank has reduced the reserve requirement ratio this year.
"Some people wonder if it is a signal saying China is loosening its monetary policy," China's central bank governor Yi Gang noted, saying China's stance remains unchanged to maintain a prudent and neutral monetary policy, and there are plenty of policy tools to be used.
(1 U.S. dollar = 6.92 yuan)
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