On September 14, the People's Bank of China released news that in order to consolidate a positive foundation for economic recovery and maintain reasonable and abundant liquidity, the central bank decided to lower the institutional reserve ratio by 0.25 percentage points on September 15, 2023 (excluding financial institutions that have implemented 5% deposit reserves). After this adjustment, the weighted average reserve ratio of domestic financial institutions was about 7.4%.
This is the second time the central bank has downgraded since 2023, and the magnitude of the downgrade is the same as the previous one (March 27, 2023). For institutional investors, this downgrade is not surprising. Many domestic brokerage firms have mentioned expectations for the third quarter downgrade. Therefore, in terms of market performance, this downgrade did not cause fluctuations in the secondary market. By the close of trading on September 15, the Shanghai Composite Index had fallen 0.28%, the Shanghai and Shenzhen 300 had fallen 0.66%, and the Science and Innovation 50 had risen 0.71%. In terms of Hong Kong stocks, the Hang Seng Index rose 0.75% and the Hang Seng Technology Index rose 0.46%.
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Downgraded twice during the year to supplement liquidity
In terms of policy goals, this downgrade mainly targets medium and large domestic banks, excluding rural commercial banks, rural cooperative banks, rural credit cooperatives, and village banks, which already have deposit reserve ratios of 5%. In terms of the scale of the downgrade, domestic brokerage firms generally predict the release of this downgradeMedium- to long-term capital is RMB 500 billion to RMB 600 billion.
In terms of expectations, since the Politburo meeting of the Central Committee was held at the end of July, the market experienced a second overall decline in the third quarter...