How the China RRR cut will impact its economy?

https://finance.yahoo.com/news/china-steers-credit-small-firms-034303771.html

The China RRR cut will release RMB$280b into the economy.

Let me offer a simple explanation of RRR.

The RRR is imposed on banks by the central bank to prevent liquidity and bankruptcy issues such as bank run.

When a bank takes a deposit of $100, it is a debt owed to the bank customer and the bank will pay the bank customer a deposit interest.  The bank will use the debt (deposit) for bank lending to earn a higher loan interest so that the bank can cover the deposit interest and earn a profit.  However, the central bank will not allow the bank to make a full loan of the deposit ($100) because it will create a liquidity risk.  Therefore, the central bank imposes a required reserve ratio (RRR) on the bank and limits the bank lending on its deposit.

For example:

If the RRR is 20%, the bank can only make a loan of $80 out of every $100 deposit.

If the bank pays a $2 interest on every $100 deposit, its cost of debt (deposit) is 2%.

When the RRR is 20% and the bank still pays a $2 interest, its cost of debt is 2.5% (2/80).  Therefore, the cost of debt for the bank increases with higher RRR.

When the RRR is lowered, the cost of debt is lowered too and the bank can earn a profit more easily with lower loan interest.

In conclusion, a lower RRR is meant to boost monetary supply and local consumption in the economy.  In other words, this is a QE policy.