China Rates Strategy - Uncertain outlook on liquidity (3 Pages)

In a surprise move last Friday, PBoC decided to impose RRR on margin deposit starting from September and the RRR payment will follow a 3-6 step schedule over the next six months. Margin deposit stood at CNY 4.44trn by the end of July and the new rule will drain about 955bn liquidity from the banking system, equivalent to a 125bps hike in RRR.