China's central bank is freeing up 1 trillion yuan ($154 billion) via a reduction of banks' reserve requirement ratio (RRR) - the amount of cash that these institutions must have in their reserves - to support the Chinese economy.
But not all sectors will reap the benefits of the measure, market sources told Fastmarkets.
The People's Bank of China said last Friday July 9 that the RRR for commercial banks - apart from those whose RRR is 5%, such as county banks, rural credit cooperatives and rural banks - would be reduced by 0.5 percentage points from July 15.
The weighted average of RRR for most commercial banks will be 9.8% after the reduction.
Part of the 1 trillion yuan freed up by the RRR cut will be used by commercial banks to service medium-term lending facilities extended to them by the central bank, sources said.
Some of the funds will also go toward offsetting the tighter capital flow in the second half of 2021 caused by companies' centralized tax payments, they said.
Companies typically pay taxes such as valued-added tax and enterprise income tax in the middle...