RRR cut buzz gathers steam

A pedestrian walks past the headquarters of the PBOC in Beijing. JIANG QIMING/CHINA NEWS SERVICE Lukewarm financing demand and the upcoming issuance of a large amount of treasury bonds may necessitate a cut in the reserve requirement ratio in the second quarter of the year as the external financial conditions are set to improve, experts said. Xuan's remarks reinforced expectations that the PBOC may cut the RRR in the coming months, as this year's 1 trillion yuan in ultra-long-term special treasury bonds may kick off issuance from the second quarter, which could tighten liquidity conditions and necessitate measures to release long-term liquidity, experts said. The scope for monetary easing facing China would further expand if the US Federal Reserve starts to reduce interest rates in the second half of the year, said Wang Tao, who expects to see cuts in policy interest rate benchmarks of 10 to 20 basis points and RRR cuts about 50 basis points this year. "If the economy was not performing well in the first quarter, there is likely to be a monetary expansion, but more likely in terms of cutting RRR rather than the direct cuts of the interest rate," Wang Dan, chief economist at Hang Seng Bank China, said during a webinar hosted by the International Finance Forum on Wednesday.