China’s central bank to pump US$110 billion into economy as US trade war intensifies
Move to free up more cash for lending aims to generate momentum after economy started to stall amid growing trade conflict with Washington
China on Sunday announced a big cut in the amount of cash commercial banks have to put aside at the central bank, a move that will make an extra US$110 billion available for lending as Beijing works to shore up confidence in its economy and markets.
The People’s Bank of China said it would cut the reserve requirement ratio by one percentage point from October 15 as a way to ensure reasonable credit growth and support economic development. As a result, banks will be handed 1.2 trillion yuan, of which 450 billion yuan (US$65 billion) will be used to repay their own borrowings from the central bank and the rest for lending.
While the central bank said the move did not represent a change to its “prudent” monetary policy stance, analysts said it was a signal Beijing was becoming increasingly worried about the domestic economic situation amid the trade war with the United States.
“This is a sign of policy easing to counter [the effects of] the US-China trade war, and shows [Beijing’s] determination to maintain growth,” said Liao Qun, chief economist of China Citic Bank International.
Zhang Ming, a researcher with the Chinese Academy of Social Sciences (CASS), said the move was a response to China’s decelerating growth as a result of the headwinds caused by the trade tensions.