China to make targeted RRR cuts to support virus-hit small firms

BEIJING (Reuters) - China will make targeted cuts in bank reserve requirement ratios (RRR) to boost lending support for small companies that have been hit hard by the coronavirus outbreak, the country’s cabinet said on Wednesday.

The targeted cuts in RRRs - the proportion of cash banks must hold in reserves - will be for inclusive financing, or supporting small firms, while there will be additional cuts for joint-stock banks, according to a statement on the Chinese government’s website.

Such cuts will help boost lending to small firms and private businesses, and reduce their financing costs to help them resume operations, said the statement issued after a meeting of the State Council chaired by Premier Li Keqiang.

China’s central bank has issued a raft of steps to cushion the blow on the economy from the virus outbreak, cutting the benchmark lending rate and making cheap subsidized loans to encourage bank lending to selected firms.

It is widely expected to cut the RRR again in coming weeks.

China will take steps to stabilize foreign trade and investment, including raising tax rebates for qualified firms and reducing the negative list, the cabinet said.

The negative list, published by China’s top economic planner the National Development and Reform Commission, specifies industries where activities by investors are either restricted or prohibited.

China will encourage financial institutions to boost credit for foreign trade sector and step up lending support for key companies vital for supply chains, the cabinet said.

China will also increase international cargo flights to help stabilize global supply chains, it added.

Reporting by Tom Daly and Kevin Yao, editing by Louise Heavens