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The requirements for minimum reserves of the banks are very high and should be lowered at the right time, according to the China Banking Regulatory Commission. According to the regulator, the right time to use new tools, such as cash transactions for medium-term lending, is after the possible decrease of the minimum reserve requirements, and not before.

People’s Bank of China keeps the rate of the minimum required reserves at the level of 17% since February last year after it was lowered four times. According to economists this ratio will be reduced in the last quarter of 2017 to 16.5% and 16% in the first three months of 2018.

People’s Bank of China began to use short-term lending operations in 2014 to channel cheap funds to banks, avoiding conditions that would create bubbles in some asset classes.

The reduction in minimum reserve requirements would allow banks to lend more, which in turn encourages credit expansion. The frequent decrease of this factor may reinforce expectations for additional monetary easing, which in turn to increase pressure on the yuan.