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(Repeats the story published late Sunday, no text change)
* Third RRR reduced this year by the PBOC, effective July 5
* Comes amidst concerns over liquidity, US trade row
* Cuts to release about 500 billion yuan for the largest lenders
* To also release 200 billion yuan for small and medium-sized banks
By Kevin Yao and Shu Zhang
BEIJING, June 24 (Reuters) – China's central bank announced on Sunday that it will reduce by 50 basis points the amount of cash that some banks must hold, releasing $ 108 billion of cash in order to speed up the pace of the debt. equity swaps and small business loans.
The reduction in reserves, the third by the central bank this year, had been widely anticipated by investors, because of concerns about the liquidity of the market and of a possible economic slowdown of a trade dispute with the states. -United.
But the 700 billion yuan ($ 107.65 billion) in cash that the central bank says will result from the reduction in reserves has been larger than expected.
The State Council announced on Wednesday that monetary policy instruments, including targeted reductions in bank reserve requirements, will be deployed to strengthen small business credit flows and keep economic growth within a reasonable range.
Economists do not rule out further cuts in reserve requirements for the rest of the year, as borrowing costs increase due to the tightening of Beijing's financial system, a campaign that is under way. in its third year, while uncertainty persists about Sino-US trade relations.
The People's Bank of China (PBOC) announced on Sunday that the latest targeted reduction in reserve requirement ratios (RRRs) for some banks – currently 16 percent for large banks and 14 percent for small banks – will come into effect on July 5.
The People's Bank of China (BDC) has announced that this reduction would generate approximately 500 billion yuan (77 billion dollars) for the five major public banks and 12 national joint-stock commercial banks. Lenders are encouraged to use the money to perform debt conversions against equity investments.
Since the end of 2016, Cypriot policymakers are pushing for debt swaps for equity investments to ease the pressure on companies struggling against their debts.
The country's leading government-controlled banks have been quick to sign agreements with state-owned companies to ease the debt burden and give them time to turn their businesses around and improve their solvency.
The latest RRR cuts will also release about 200 billion yuan of financing for small and medium-sized banks to increase lending to small businesses short of credit, the People's Bank of China said.
The combined liquidity injection of 700 billion yuan exceeded market expectations of 400 billion yuan. As part of the latest targeted reduction of the ACB in April, 400 billion yuan of net liquidity was released.
"The intensity of the movement has exceeded market expectations," said Wang Jun, chief economist based in Beijing at Zhongyuan Bank.
"This initiative will help support the real economy and stabilize financial markets.We have seen an increase in debt default and financing constraints of small businesses, as well as a sharp adjustment of the capital market . "
But the latest reduction in reserves signals a "policy adjustment", not a policy reversal, Wang said.
The central bank said Sunday that it will keep the monetary policy cautious and neutral.
Sunday's announcement followed the worst weekly loss on the Chinese stock market since early February, fears of a large-scale trade war with the United States having weighed.
The Chinese yuan also fell on Friday to its lows against the dollar in more than five months, although it remained firm against a basket of currencies trading partners, and a sharp depreciation is not in the cards.
Trade war
The latest RRR cut should come into effect one day before the United States and China start charging higher duties on the respective lists of goods.
Fears of a large-scale trade war with Washington have heightened concerns over prospects for the world's second-largest economy, after weaker than expected growth data for May and Beijing's financial crackdown begins to weigh on the activity.
Net exports overall have already weighed on growth in the first quarter after giving an additional boost to the Chinese economy last year, highlighting the need to maintain the strength of demand if new tariffs imposed on the United States are imposed.
Beijing could also backtrack on efforts to reduce its debt dependence if the conflict degenerated into a total trade war, say some economists.
Beijing's financial risk reduction has already boosted borrowing costs and curtailed alternative and darker sources of finance for companies such as the shadow banking system.
Tight liquidity conditions have led to a growing number of credit default issues with private companies facing increasing refinancing risks. The latest official polls have also shown that small builders have benefited from tight funding.
The weighted average rate of loans to non-financial corporations, a key indicator reflecting corporate financing costs, increased by 22 basis points in the first quarter to 5.96%, according to data from the PBOC. This compares to a total of 47 basis points in 2017.
Policymakers have attempted to strike a delicate balance between the need for more stringent oversight and reforms and to ensure the stability of the financial system, while keeping economic growth on track.
ANZ Research said Sunday that it is still expecting an additional 50bp cut in October.
Economists are still expecting China's economic growth to slow to 6.5 percent this year from 6.9 percent in 2017, citing rising borrowing costs, tighter limits on industrial pollution. and a continued reduction in local government spending. ($ 1 = 6,5027 Chinese renminbi yuan) (Additional report by Norihiko Shirouzu and Ryan Woo edited by Toby Chopra and David Evans)
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