China should cut RRR to boost liquidity now - paper

CHINA-ECONOMY-RRR:China should cut RRR to boost liquidity now - paper

China should act now to cut again the amount of money banks must hold as reserves to help boost liquidity and stabilise economic growth, the official China Securities Journal said in a front-page editorial on Tuesday.

The paper said a cut to the required reserve ratio (RRR), currently at 20 percent, would mitigate the risk of a liquidity crunch in July from a seasonal surge in interest payments on deposits.

"In order to ensure stable and abundant liquidity in banking system, the time is ripe for cutting RRR again," the article said.

An increase in fiscal deposits could also draw liquidity from the banking system in July, while reduced money supply from open market operations and foreign capital inflows are also tightening liquidity conditions.

It is unclear if the article reflects official policy thinking, but its appearance in a newspaper run by China's official Xinhua news agency implies it is at least under consideration.

To shore up economic growth, China's central bank cut benchmark interest rates in early June, the first such move since the depths of the 2008/09 global economic crisis. The cut followed three 50 basis point reductions in the bank reserve ratio since November.

Official and HSBC PMI manufacturing surveys signalled a broading economic slowdown in June, raising expectations of more monetary and fiscal policy easing.