(Yicai Global) Jan. 15 -- China's central bank has defended its decision to cut financial institutions' reserve requirement ratios at the beginning of this year, saying that the move will help to buoy the Chinese yuan's exchange rate.
A lower RRR will contribute to a stable economy and thus help to stabilize the exchange rate, Zhu Hexin, deputy governor of the People's Bank of China, said at the press conference in Beijing today.
The central bank decided to lower the requirements related to financial institutions' liquid assets by 1 percent to further support the real economy, improve liquidity and cut firms' borrowing costs, the PBOC announced on Jan. 4. The bank expected to release about CNY1.5 trillion (USD222.1 billion) in funds into the financial system.
China's economic situation is generally stable but it may become more complicated, Zhu added. The PBOC will enhance its counter-cyclic adjustment factor to adopt a more flexible monetary policy and to maintain sufficient liquidity, he added.
China has a sufficient level of foreign exchange reserves, so the PBOC has faith in itself to stabilize the yuan's exchange rate at a reasonable level, Zhu added.
The country had CNY16.2 trillion new yuan-denominated loans last year, an increased of CNY2.6 trillion from a year earlier. The year-end loan balance climbed 13.5 percent, up 0.8 percent compared with the end of 2017.
Editor: Emmi Laine