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China allows temporary use of cash reserve to support market liquidity

Updated: Dec 29,2017 3:09 PM     Xinhua

BEIJING — China’s central bank said on Dec 29 that national commercial banks will be allowed to use part of their cash reserves to meet the rising cash demand ahead of the upcoming Chinese Lunar New Year.

The People’s Bank of China said in a statement that national commercial banks could use up to 2 percent of their cash reserves, which they keep with the central bank, for 30 days to cover short-term liquidity gaps during the coming Spring Festival, which will fall on Feb 16, 2018.

Chinese commercial banks are required to deposit a certain amount of cash with the central bank as reserve, which cannot be used for loans or other investments.

Currently, the reserve requirement ratio for China’s large commercial banks stands at 16.5 percent, while that for medium and small-sized financial institutions is 13 percent.