China cuts banks' reserve ratios by 1% as economy slows

  • The cut in banks' reserve requirement ratios is the first in 2019 and the fifth in a year by the People's Bank of China.
  • The Chinese economy faces its weakest growth since the global financial crisis and mounting pressure from U.S. tariffs.
A pedestrian walks past the People's Bank of China headquarters in Beijing, China, on Monday, Feb. 26, 2018.
Giulia Marchi | Bloomberg | Getty Images
A pedestrian walks past the People's Bank of China headquarters in Beijing, China, on Monday, Feb. 26, 2018.

China's central bank said on Friday it was cutting the ratio of cash that banks must hold as reserves by 100 basis points (bps), or 1 percent, as it looks to reduce the risk of a sharper slowdown in the world's second-biggest economy.

The cut in banks' reserve requirement ratios (RRR) is the first in 2019 and the fifth in a year by the People's Bank of China (PBOC) as the economy faces its weakest growth since the global financial crisis and mounting pressure from U.S. tariffs.

The reduction is being made in two equal stages, effective Jan. 15 and Jan. 25, the PBOC said. The reserve requirement ratios (RRRs) are currently 14.5 percent for large banks and 12.5 percent for smaller banks.

Further cuts in the RRR had been widely expected this year, especially after a spate of weak data in recent months showed China's economy was continuing to lose steam. The size of the move was on the upper end of market expectations.