China will use timely RRR cuts to support the economy, the cabinet quoted state media as saying

China will step up financial support for the real economy, especially industries and small businesses hit by the COVID-19 pandemic, and reduce financing costs, state media quoted the cabinet or state council as saying after a regular meeting.

“Given the changes in the current situation, we will encourage large banks with higher provisions to lower provisioning ratios in an orderly manner and will deploy monetary policy tools, including RRR cuts, in a timely manner,” it was quoted as saying.

The People’s Bank of China (PBOC) normally follows the orders of the cabinet, which oversees the world’s second-biggest economy and sets the basic course of Chinese politics.

Most recently, in December, the PBOC cut the RRR — the amount of cash banks are required to hold in reserves — by 50 basis points.

A government adviser said on Wednesday that China should cut the minimum interest rate and interest rates to support the slowing economy even as consumer inflation rises steadily.

Some analysts expect the Chinese central bank to cut interest rates on its medium-term lending facility (MLF) as early as Friday.

Authorities will also take measures to boost consumption by preventing municipalities from imposing new restrictions on vehicle purchases and increasing export tax rebates to stabilize foreign trade, the cabinet said.

More steps will be taken to support new energy vehicle purchases and consumption in rural areas, the cabinet added.

(Reporting by Kevin Yao and Beijing Newsroom, editing by Gareth Jones)