China appears to have prioritized goosing growth over concerns about fund outflows, with the central bank moving Monday to cut banks' reserve requirement ratios (RRR).
The People's Bank of China (PBOC) cut the RRR, or the amount of cash banks need to hold, by 0.5 percentage point, surprising markets with the move that came in the early evening China time.
The cut, which came into effect Tuesday, means that most large Chinese banks will have a reserve ratio of 17 percent. This is the fifth time in the past year that the PBOC has cut the RRR, with the last cut on October 23.
RRR cuts are designed to increase liquidity in the economy, in the hope of boosting consumer spending and capital investment.
"The aim clearly is to support the economy at a time that downward pressures on growth remain strong and uncertainty is elevated," Louis Kuijs, an economist at Oxford Economics, said in a note on Monday.