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China's two reserve requirement ratio cuts have prompted market speculation that a new cycle of monetary easing is underway, but Fitch Ratings said it is too early to conclude recent policy actions mark a clear reversion in stance.
Fitch said that the recent RRR cuts should be viewed in the context of liquidity management measures to ensure interbank funding conditions remain stable.
Over the weekend, the People's Bank of China announced its plan to reduce the ratio of cash that banks should retain as reserves by 50 basis points.
A return to policy settings that add to the economy's imbalances and vulnerabilities, such as credit stimulus, nevertheless remains a risk and could put downward pressure on China's sovereign rating, as Fitch has previously stated.
