To follow the principles adopted at the 49th Executive Meeting of the State Council, and to beef up support to the agricultural sector, farmers, rural areas, micro and small enterprises, and enhance the capacity of financial industry to serve the real sector, the PBC has decided to reduce, effective from June 16, 2014, the deposit reserve ratio by 0.5 percentage points for commercial banks (excluding those that were subject to the deposit reserve ratio reduction on April 25, 2014) that have complied with prudential requirements and have reached the required ratios in their lending to the agricultural sector, rural areas, farmers (agro loans), or to small and micro enterprises.

Specifically, the required shares are, the ratio of new agro loans to total new loans is more than 50 percent in the last year and the ratio of agro loan outstanding to total loan outstanding is more than 30 percent at the end of last year; or, the ratio of new loans to small and micro enterprises to total new loans is more than 50 percent in the last year and the ratio of small and micro enterprise loan outstanding to total loan outstanding is more than 30 percent at the end of last year. Based on these standards, this round of targeted reduction covers about two thirds of the city commercial banks, 80 percent of the rural commercial banks that are not incorporated at the county level, and 90 percent of the rural cooperative banks that are not incorporated at the county level.

In addition, in order to encourage finance companies, financial leasing and auto leasing companies to contribute to more efficient fund use and the expansion of consumption, their RMB deposit reserve ratio is cut by 0.5 percentage points.

The PBC has all along used monetary policy instruments to support the adjustment of economic structure, in particular, to encourage and guide financial institutions to allocate a larger share of credit resources to the agricultural sector, rural areas, farmers and small and micro enterprises. This round of targeted reduction of deposit reserve ratio is to encourage commercial banks and other financial institutions to allocate more fund to the sectors and fields in the real sector that need financial sector support, and to make sure the monetary policy is transmitted more smoothly to the real economy. We expect the financial institutions to follow the guidance of credit policy, use the released fund to support key sectors and weak links in the economy, including the agricultural sector, rural area, farmers, small and micro enterprises, and etc, and optimize their credit structure. The PBC will enhance oversight and guidance, assess the effect of policies and ensure that the policy will provide positive incentives.

At the current stage, the liquidity is generally sufficient and the stance of monetary policy has remained unchanged. The PBC will continue to implement the sound monetary policy, keep liquidity at reasonable volumes, realize the reasonable growth of money, credit and all-system financing aggregate, and contribute to sound and stable economic growth.