The first reserve requirement ratio cut in 2025 will be implemented today, injecting about 1 trillion yuan of liquidity into the financial market and providing strong support for the sustained recovery and improvement of the economy. Experts say that this reserve requirement ratio cut fully reflects a moderately loose monetary policy stance. In the future, the People's Bank of China will continue to strengthen its analysis and monitoring of the supply and demand of liquidity in the banking system and changes in the financial market. It will comprehensively use monetary policy tools such as reserve requirements and open market operations to maintain sufficient liquidity and create a suitable monetary and financial environment for stable economic growth. Strengthening the coordination of monetary and fiscal policies. The People's Bank of China recently announced a 0.5 percentage point reduction in the reserve requirement ratio for financial institutions starting from May 15th (excluding financial institutions that have already implemented a 5% reserve requirement ratio). Experts say that this reserve requirement ratio cut has multiple positive implications, not only optimizing the debt structure of banks, but also helping to strengthen the coordination between monetary and fiscal policies. On the one hand, reserve requirement ratio cuts can help reduce the cost of bank debt, alleviate the pressure of narrowing net interest margins, and create space for reducing physical financing costs. The Governor of the People's Bank of China, Pan Gongsheng, recently stated at a press conference of the State Council Information Office that reducing reserve requirement ratios can optimize the structure of liquidity provided by the People's Bank of China to the banking system, lower the cost of bank liabilities, and enhance the stability of bank liabilities. On the other hand, reserve requirement ratio cuts can strengthen the coordination between monetary and fiscal policies. Wen Bin, Chief Economist of Minsheng Bank, stated that the expected net financing amount of government bonds in the second quarter is around 4.3 trillion yuan, which is an important factor affecting liquidity in the near future. In the coming period, government bonds will maintain a fast pace of issuance, which means that the bond market will usher in a larger peak of issuance. The People's Bank of China needs to promote the smooth issuance of government bonds through appropriate liquidity arrangements. In addition, reserve requirement ratio cuts can support credit allocation and boost market confidence. Lian Ping, Chief Economist of Guangkai Chief Industry Research Institute, stated that the reserve requirement ratio cut can support commercial banks to increase credit allocation, especially to increase financial support for enterprises in export, agriculture and other related fields; At the same time, support financial institutions and large central enterprise groups, listed companies, etc. to increase their holdings of financial assets, boosting confidence in the financial market. Unlike previous reserve requirement ratio cuts, the People's Bank of China has implemented a comprehensive reserve requirement ratio cut and also lowered the reserve requirement ratio for automobile finance companies and financial leasing companies to improve their reserve requirement systems. The market generally believes that the reserve requirement ratio cuts for automotive finance companies and financial leasing companies will help reduce their debt costs, improve debt stability, and enhance their credit supply capabilities in specific fields. Experts say that auto finance companies and financial leasing companies do not belong to deposit based financial institutions and do not accept deposits from the public. Reserve accounts opened with the People's Bank of China cannot be used for liquidation, and the liquidation function is actually undertaken by interbank deposit accounts opened with banks. Their monetary creation mechanism is fundamentally different from that of banks, and reducing reserve requirements for such institutions is an important measure to improve the deposit reserve system. Lian Ping analyzed that the purpose of lowering the reserve requirement ratio for automotive finance companies and financial leasing companies is to provide greater financial support for consumption and investment in the "two new" and "two dual" fields such as automobiles and equipment. Focusing on enhancing the funding supply capacity of automobile finance companies, the "2025 Q1 China Monetary Policy Implementation Report" proposes to support automobile finance companies and consumer finance companies in issuing financial bonds, study the moderate increase of the registration limit for consumer credit asset securitization, promote the moderate expansion of securitizable assets in the consumer sector, and increase the support for credit fund supply. Experts suggest that there is still room for reserve requirement ratio cuts in the future. Taking into account both internal and external factors, there is still room for monetary policy to be moderately loose, which can provide key support for effectively hedging external fluctuations and stabilizing macroeconomic operations. From the perspective of reserve requirement ratio, Luo Zhiheng, Chief Economist and Dean of the Research Institute of Yuekai Securities, stated that after the reserve requirement ratio reduction, the average level of China's overall reserve requirement ratio has dropped to 6.2%, which is still far from the historical low of 6.0%, and there is a gap with the reserve requirement ratio of 0% in developed countries and about 5% in major emerging economies. In the future, it may be further lowered by 1 to 2 percentage points. Against the backdrop of low domestic price levels, it is expected that the People's Bank of China will continue to implement reserve requirement ratio cuts in the second half of the year, with an annual reduction of 1 percentage point, comparable to 2024. ”Wang Qing, chief macro analyst of Oriental Jincheng, believes that the People's Bank of China may resume net purchase of treasury bond bonds in the open market in the future, and inject long-term liquidity into the banking system instead of reducing reserve ratio. Lian Ping stated that in order to release more medium and long-term funds to meet market demand, it is advisable to lower the reserve requirement ratio by 0.75 to 1 percentage point for the whole year of 2025. (New Society)