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China cuts RRR for rural financial institutions

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BEIJING, April 22 (Xinhua) -- China's central bank announced Tuesday it will cut the reserve requirement ratio (RRR) for county-level rural commercial banks by 2 percentage points and that of rural credit cooperative unions by 0.5 percentage point beginning Friday.

The adjustment will help enhance financial support for rural development and guide credit flow to the rural areas, the People's Bank of China said in an online statement.

"In the context of prudent monetary policy, the decision will not affect the overall liquidity in the banking system," said the central bank, adding it will continue to achieve reasonable growth in credit and social financing with a focus on improving financing structure.

The move came after a State Council meeting last week pledged a string of financial and tax moves to provide more support for the rural economy and bolster job creation.

The RRR sets the minimum fraction of customer deposits that each bank must hold as reserves rather than lending, and is an important monetary tool used by central banks. Lowering the RRR is often aimed at boosting bank lending and economic growth.

China's gross domestic product (GDP) rose 7.4 percent year on year in the first quarter, slightly outpacing market estimates but marking the lowest quarterly growth rate since the third quarter of 2012.

Instead of unleashing strong stimulus policies, the government this time has opted to take smaller but more targeted moves, including cutting tax for micro and small businesses, facilitating shanty-town renovation and speeding up railway construction to support growth.

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