China's targeted reserve cuts to benefit more small firms

© Reuters. Headquarters of the PBOC, the central bank, is pictured in Beijing© Reuters. Headquarters of the PBOC, the central bank, is pictured in Beijing

HONG KONG (Reuters) – China’s central bank has relaxed its conditions on targeted reserve requirement cuts to benefit more small firms, in the latest move to support the slowing economy.

The People’s Bank of China will include loans for small firms with a credit line of less than 10 million yuan ($1.46 million) in its assessments for targeted reserve requirement cuts, up from 5 million yuan, it said on Wednesday.

“This will help expand the coverage of preferential policies for inclusive financing for small enterprises and will also allow financial institutions to meet the lending needs of these enterprises,” the central bank said in a statement on its website.

The policy change takes effect from 2019, it said.

China’s economic growth slowed to 6.5 percent in the third quarter, the weakest pace since the global financial crisis. Indications are that momentum is likely to come off further in the fourth quarter and 2019.

China’s cabinet has pledged to improve inclusive financing and policy on targeted reserve requirement cuts for small and private companies.

The government has been providing support for small firms and private enterprises, which are vital for economic growth and employment as headwinds stiffen due to trade friction with the United States.

The central bank cut reserve requirements for lenders four times in 2018, with further reductions widely expected.

($1 = 6.8627 renminbi)

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