China could lower its RRR before the end of the year

The China Securities Daily is gaining attention right now. They cite a brokerage firm that says the PBOC could lower the reserve requirement ratio as early as this month. Chinese 10-year rates are down 5bp to 2.85%.

The comment follows a statement by Premier Li Keqiang on Friday. He said China will reduce the RRR at the appropriate time to strengthen support for the real economy, especially for small and medium enterprises. I haven’t seen the Securities Daily article, but analysts are probably reading this comment.

In other news from China, the city of Ningbo has closed its schools due to a covid-19 outbreak. If the omicron variant is really more transmissible than delta, then I’m concerned about China’s covid-zero strategy. It is already an extremely difficult virus to remove and it could even break China’s ability to stop it.


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