why is that

1998. China's foreign exchange reserves also fell as investors sold renminbi and bought foreign currency. 'The most important reason for the cut is liquidity demand in the banking system,' said Haibin Zhu, chief China economist at JPMorgan in Hong Kong ... The required reserve ratio, known as the RRR, specifies the portion of a commercial bank's deposits that must be held on reserve at China's central bank, where it is unavailable for loans and other investments. For most of the past decade, "twin surpluses' on both the current and capital accounts swelled China's foreign exchange reserves and its domestic money supply. In response, the People's Bank of China (PBOC) raised the RRR steadily as a way to sterilise these inflows and prevent inflation. The RRR for China's biggest banks rose from 8% in 2005 to a high of 20.5% in late 2012 . Wednesday's cut of 0.5% brings that rate down to 19.5% - although this is still much higher than any other major economy. With inflows now reversing, economists expect at least one more RRR cut this year. 1998. China's foreign exchange reserves also fell as investors sold renminbi and bought foreign currency. 'The most important reason for the cut is liquidity demand in the banking system,' said Haibin Zhu, chief China economist at JPMorgan in Hong Kong ... The required reserve ratio, known as the RRR, specifies the portion of a commercial bank's deposits that must be held on reserve at China's central bank, where it is unavailable for loans and other investments. For most of the past decade, "twin surpluses' on both the current and capital accounts swelled China's foreign exchange reserves and its domestic money supply. In response, the People's Bank of China (PBOC) raised the RRR steadily as a way to sterilise these inflows and prevent inflation. The RRR for China's biggest banks rose from 8% in 2005 to a high of 20.5% in late 2012 . Wednesday's cut of 0.5% brings that rate down to 19.5% - although this is still much higher than any other major economy. With inflows now reversing, economists expect at least one more RRR cut this year