The official website of the People's Bank of China announced that in order to further support the development of the real economy, optimize the liquidity structure of commercial banks and financial markets, reduce the cost of financing, and guide financial institutions to continue to increase their support to small and micro enterprises, private enterprises and innovative enterprises, it is decided to reduce the reserve requirement ratio (RRR) of large commercial banks, joint-stock commercial banks, urban commercial banks, non-county rural commercial banks and foreign banks by 1 percentage point dating from October 15, 2018. The mid-term lending facility due on that day (MLF) will not be continued.

Commercial banks will receive large amounts of circulating funds in a short period of time after the reserve requirement ratio is reduced, which will increase their ability to lend, and affect investment, consumption and even exports of the whole society.

A reduction in the reserve requirement ratio is enough to help boost economic confidence.