china announced a reserve ratio cut on friday intended to free up billions of dollars in liquidity as worries intensify over prolonged covid restrictions that have disrupted businesses across the country the central bank said it would cut the reserve requirement ratio rrr by 025 percentage points for most banks starting april 25 and 05 percentage points for some smaller banks  lowering the amount of cash banks must hold as china battles its worst coronavirus outbreak since the start of the pandemic the move should free up some 530 billion yuan 83 billion of longterm liquidity to be injected into the economy the bank said in a statement a virus surge has led to restrictions on dozens of cities in recent weeks as officials stick to a strict zerocovid policy of stamping out clusters as they emerge leaving areas like the key business hub of shanghai locked down for weeks manufacturers have been forced to halt operations while carmakers warned this week that the situation could threaten auto output and key ports like shanghai have become clogged a key aim of the rate cut is to guide financial institutions to actively use funds from the rrr cut to support industries and small medium and micro enterprises severely affected by the pandemic said the peoples bank of china in a statement it added that the move would also reduce the capital costs of financial institutions by about 65 billion yuan per year analysts said the move would have a limited impact on the slowing economy the rrr cut should nudge down bank lending rates which will take a bit of pressure off of indebted borrowers said julian evanspritchard senior china economist at capital economics but on its own it will do little to boost lending growth the cut was also less than the market expected said zhiwei zhang chief economist at pinpoint asset management i don’t think this rrr cut matters that much for the economy at this stage he said this is because the main challenge remains omicrondriven virus outbreaks and hard lockdown policies  a beijing policy that looks unlikely to change more liquidity may help on the margin but it doesn’t address the root of the problem he said