China's first RRR cut for financial institutions in 2025 takes effect

A 0.5-percentage points reduction in the reserve requirement ratio (RRR) for eligible financial institutions takes effect in China on Thursday, which is expected to inject roughly 1 trillion yuan (about 139 billion U.S. dollars) of long-term liquidity into the financial market.

The RRR cut, the first such move since the start of this year, was announced last week by the People's Bank of China, China's central bank.

The RRR cut was among a raft of supportive measures that also included policy rate cut and increased financial support through relending facilities announced by the monetary and financial regulatory bodies recently, as the world's second-largest economy steps up efforts to stabilize markets and sustain economic recovery amid external headwinds.

Also starting Thursday, the RRR for auto financing and financial leasing companies is slashed by 5 percentage points to 0 percent, with the cut expected to increase the credit supply capacity of these two types of institutions in their respective fields.

Experts said that the reserve requirement cut will help boost domestic demand and stabilize investments. "The lowered RRR will increase the long-term stable funds in the banking system, allowing businesses and residents to obtain loans at lower interest rates. This will help boost domestic demand and stabilize investments. The reduction will also ease liquidity management pressure on banks. Following this round of cuts, the RRR for large banks in China remains relatively high, providing ample policy flexibility," said Wang Yifeng, deputy director of the Research Institute at Everbright Securities.

"To ensure ample liquidity, the People's Bank of China has been conducting short-term liquidity operations almost daily, with significant volumes. Currently, the main issue in market liquidity is structural. This reserve requirement cut will increase the supply of long-term liquidity, reduce the reliance on short-term liquidity tools, and improve the maturity structure of market liquidity. Additionally, the cut will lower banks' funding costs, reduce their incentive to attract deposits with high interest rates, and limit arbitrage opportunities for non-bank institutions," said Dong Ximiao, chief researcher of the Merchants Union Consumer Finance Co., Ltd.

China's first RRR cut for financial institutions in 2025 takes effect

China aims to achieve secure and reliable supply of key core artificial intelligence (AI) technologies by 2027, with its industrial scale and empowerment level remaining among the world's forefront, according to a recent government action plan.

The plan, jointly issued by eight departments including the Ministry of Industry and Information Technology, the Cyberspace Administration of China, and the National Development and Reform Commission, outlines an ambitious push to deeply integrate AI with the manufacturing sector, foster new quality productive forces and comprehensively empower new industrialization. By 2027, the plan targets the deep application of three to five general-purpose large AI models in manufacturing, the development of specialized, full-coverage industry-specific large models, the creation of 100 high-quality industrial datasets, and the promotion of 500 typical application scenarios.

It also aims to cultivate two to three globally influential ecosystem-leading enterprises, a batch of specialized and sophisticated small and medium-sized enterprises, and a group of enabling service providers proficient in both AI technology and industry know-how.

Furthermore, China plans to build a world-leading open-source ecosystem, enhance security governance capabilities, and contribute Chinese solutions to global AI development.

The document outlines measures including promoting the coordinated development of AI chips' hardware and software, supporting innovations in model training and inference methods, fostering key industry-specific large models, and deeply embedding large model technology into core production processes.

The plan also emphasizes making breakthroughs in key technologies such as security protection for industrial model algorithms and training data protection.

China aims for secure, reliable supply of AI core tech by 2027