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Suan Teck Kin, CFA, Head of Research at UOB Group, assessed the latest RRR cut by the PBoC.

Key Quotes

“China cut RRR by 50bps effective 6 Jan 2020 and expected to release liquidity of RMB880bn”.

“We had anticipated a RRR cut in 1Q20, which was bolstered by Premier Li’s comments made in late Dec (2019)”.

Another cut in RRR remains possible as the Chinese government focuses on reducing costs of financing to the real economy, even as there are positive signs of easing US-China trade tensions”.