This adjustment excludes financial institutions already operating at the 5% reserve requirement ratio. Additionally, the PBOC is implementing a more significant 5 percentage point reduction in the RRR specifically for auto finance companies and financial leasing companies. This broad-based RRR cut is projected to inject approximately 1 trillion yuan of long-term liquidity into the financial system.
According to Pan Gongsheng, Governor of the People’s Bank of China, this reduction will lower the average overall reserve requirement ratio from 6.6% to 6.2%. Furthermore, the reserve requirement ratio for auto finance companies and financial leasing companies will be temporarily lowered from 5% to 0%.
Given that these two types of institutions directly support areas such as auto consumption and equipment renewal investment, this targeted RRR reduction is expected to effectively enhance their capacity to provide credit to these specific sectors.
