China's central bank said Friday that it will lower the amount of deposits banks have to set aside, the first time in 2023, underscoring Beijing's efforts to kick-start economic growth this year.

The People's Bank of China said it will cut banks' reserve-requirement ratio by 0.25 percentage point, which will bring the weighted average RRR level for the whole banking system to 7.6%. The change will take effect on March 27, the PBOC said in a statement.

The central bank previously lowered banks' RRR by 25 basis points in December, when China's economy was roiled by Beijing's stringent Covid-19 restrictions, releasing 500 billion yuan ($72.48 billion) of liquidity into the market.

Friday's announcement followed a major government-personnel shuffle earlier this month. At a press conference Monday, China's newly appointed premier, Li Qiang, pledged to shore up growth and restore business confidence in the world's second-largest economy.

PBOC Gov. Yi Gang signaled a RRR cut on March 3. In a press conference at the time, Mr. Yi said China has cut the reserve-requirement ratio 14 times since 2018, which brought the RRR level from around 15% to 8%, but the RRR cut is still an "effective" way to support the economy and keep the liquidity at a reasonable level.

Liu Guoqiang, a PBOC vice governor, in the same briefing said the central bank will avoid dramatic policy tightening or easing despite improvements in the economy.

The central bank on Wednesday left its key policy rates unchanged, suggesting a hold on benchmark lending rates later this month.

The PBOC injected CNY481 billion of liquidity into the banking system via its one-year medium-term lending facility at an interest rate of 2.75%. It also injected CNY104 billion of funds via seven-day reverse repurchase agreements at unchanged interest rates of 2.00%.

The central bank in its statement said Friday's cut is intended to better serve the real economy and keep liquidity reasonably sufficient in the banking system, reiterating that it won't resort to massive stimulus.


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(END) Dow Jones Newswires

03-17-23 0703ET