, the PBOC unveiled widely expected another boost for the slowing Chinese economy: the central bank announced that starting Jan 6, it will lower the required reserve ratio (RRR) - or the amount of money banks are required to have on hand - by 50bps for commercial lenders, in the process releasing about 800 billion yuan ($115 billion) in liquidity from the cash-strapped financial system.

Currently the required reserve ratio is 13% for large banks and 11% for small banks. The cut, which is the first since September, will bring the blended reserve ratio for Chinese banks to the lowest level since October 2007.

The 50bps RRR cut is meant to help banks reduce their lending rate to businesses, the PBOC said in a separate statement, which is ironic because while on one hand the PBOC pressures commercial banks by ordering them to lower the amount of interest they can charge customers by 20bps (with the benchmark rate recalibration), on the other it boosts systemic liquidity to offset the adverse effects of its first action, something we predicted would happen earlier this week, to wit: