China cuts RRR by 20 points, ramps up manufacturing to full capacity to makeup coronavirus losses

China, which came to a standstill due to the coronavirus outbreak for over two months, cut the Reverse Repo Rate (RRR) by 20 basis points on Monday to facilitate more lending as the world's second largest economy ramped up the manufacturing sector to almost 100 per cent of its capacity to make up for big losses.

A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.

China's manufacturing sector has steadily resumed production after the shutdown due to COVID-19, with 98.6 per cent of the major industrial firms nationwide having restarted work as of Saturday, the Ministry of Industry and Information Technology (MIIT) said on Monday.

Xin Guobin, vice minister of the MIIT, told the media here on Monday that around 89.9 per cent of the employees in industrial companies with an annual revenue of more than 20 million yuan (about USD 2.84 million) had returned to their posts.

In the coronavirus epicentre Hubei province, which is gradually returning to normal after the virus abated, the average work resumption rate of industrial firms have surpassed 95 per cent by far, state-run Xinhua news agency reported.

The production and operation of large pharmaceutical companies producing vitamins, antibiotic, antipyretic and analgesic ingredients have returned to normal, Xin said.

Meanwhile, 76 per cent of small and medium-sized enterprises have restarted to work nationwide.

Some 92 leading enterprises in key industries have helped boost the work resumption of more than 400,000 their upstream and downstream enterprises, Xin said.

Separately China's central bank on Monday pumped liquidity into the market through seven-day reverse repos while cutting the interest rate by 20 basis points to lower lending costs and offset the economic shock of COVID-19.

The People's Bank of China (PBOC) injected 50 billion yuan (about USD seven billion) into the market through the seven-day reverse repos at an interest rate of 2.2 per cent, the central bank said in a statement on its website.

Before Monday's move, the PBOC has skipped reverse repos for 29 straight trading days, the Xinhua report said.

Ma Jun, a member of the monetary policy committee of the PBOC, said the RRR cut indicates that the central bank has strengthened counter-cyclical adjustments in the face of production resumption at home and a worsening