The 50bp reduction in China’s reserve requirement ratio (RRR), effective on 5 February, is less of a policy easing than it appears, says Fitch Ratings. The measure compensates almost exactly for liquidity destroyed by cross-border capital outflows during 2014.

Accompanying targeted-easing measures are in line with the authorities’ practice in this easing cycle, going back to 3Q14. Latest data from the State Administration of Foreign Exchange (SAFE) indicates that net capital outflows in 2014 totalled USD96bn (CNY575bn).