China Cuts Reverse Repo Rate by 0.2%p to 2.2%, Injects 50 Billion Yuan Liquidity (Update)

[Asia Economy Beijing=Special Correspondent Park Sun-mi] On the 30th, the People's Bank of China cut the 7-day reverse repurchase (reverse repo) rate from 2.4% to 2.2%.

Through this reverse repo rate cut, the People's Bank of China is supplying liquidity of 50 billion yuan to the financial market. This is interpreted as a liquidity supply measure to absorb the economic shock caused by the spread of COVID-19.

China froze the 1-year Loan Prime Rate (LPR), which serves as the de facto benchmark interest rate, at 4.05% and the 5-year LPR at 4.75% on the 20th, but on the 16th, it took measures to support liquidity for small and medium-sized enterprises and private enterprises facing funding difficulties by selectively lowering the reserve requirement ratio.

Also, last month, the People's Bank of China lowered both the 1-year Medium-term Lending Facility (MLF) rate and the LPR, while cutting the 7-day reverse repo rate from 2.5% to 2.4% and the 14-day reverse repo rate from 2.65% to 2.55%, continuing to absorb financial market shocks through liquidity supply.

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