China central bank says won't rush to cut bank reserve ratio despite liquidity squeeze: sources

[BEIJING] China's central bank will not rush to cut the amount of cash banks must hold as reserves, despite a liquidity squeeze ahead of the Lunar New Year, an assistant central bank governor has said, according to sources.

The central bank "will not easily cut banks' reserve requirement ratios (RRR)", Zhang Xiaohui told senior officials of policy banks and commercial banks at a recent meeting on liquidity management, said the sources with direct knowledge of the meeting.

Zhang said the central bank could use other policy tools to add liquidity into the banking system, as cutting RRR could send a strong signal on policy easing, according to the sources.

Moves by the central bank to inject more than 600 billion yuan (US$91.19 billion) in liquidity ahead of the Lunar New Year holiday in February could substitute for a cut in the cash amount banks must hold as reserves, the central bank's chief economist was this week quoted as saying.

Liquidity often tightens ahead of the week-long holiday and the central bank usually injects large amounts of cash into the banking system before the festivities to keep rates steady.

The first day of the new year is Feb. 8.

Yi Gang, a vice governor of the central bank, told the same meeting the bank would keep the yuan basically stable against a basket of currencies.

REUTERS