China's reserve requirements and their effects on economic output and assets markets during 2008-2018

From early 2018, China seems to have entered another around of reserve requirement ratio cuts. In fact, since the mid-2000s, China has used reserve requirements as a policy instrument much more frequently and intensively than before. This study reviews the recent developments of China's reserve requirements, and examines the linkage between reserve requirement adjustments and output growth and assets markets by using a series of univariate regressions, rolling correlations and error correction models. The results demonstrate an increasing ineffectiveness of reserve requirements ratio cuts on real economy and rising effectiveness on assets markets. Finally, this study discusses the policy implications of these findings.