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HomeEconomyChina frees up $70bn for banks to underpin slowing economy

China frees up $70bn for banks to underpin slowing economy

BEIJING (Reuters) – China on Friday cut the amount of cash banks must hold in reserves for the second time this year, spending about 500 billion yuan ($69.8 billion) to prop up a struggling economy. announced the release of long-term liquidity. As COVID cases reached record highs.

The People’s Bank of China (PBOC) has announced that it will cut the reserve requirement ratio of banks by 25 basis points from 5 December. This will reduce the weighted average ratio of financial institutions to 7.8%, the central bank said.

The central bank said the cuts would help “keep liquidity reasonably ample and facilitate a steady decline in the cost of overarching funding”, helping stabilize the slowing economy.

As the Federal Reserve and other central banks hike interest rates to combat inflation, the PBOC is walking a policy tightrope, trying to shore up a slowing economy. They want to avoid a big rate cut that could fuel pressure and draw money out of China.

“The cuts will help banks implement instructions to defer loan repayments from companies struggling with extended lockdown restrictions,” Mark Williams, chief Asia economist at Capital Economics, said in a report. ‘ said.

“But few businesses and households are willing to take on new debt in this uncertain environment.”

The cut follows a 25-basis-point cut in April, with state media citing the Cabinet on Wednesday that China will use a timely reserve ratio cut, along with other monetary policy tools, to boost liquidity. was widely expected after stating that it would keep the

The People’s Bank of China (PBOC) said on Friday it would step up the implementation of prudent monetary policy and focus on supporting the real economy while avoiding stimulus measures like floods.

The latest cut will affect all financial institutions except those implementing a 5% reserve ratio, the central bank said.

China, the world’s second-largest economy, suffered a sharp slowdown in October, and a recent spike in COVID-19 cases has heightened concerns about growth in the fourth quarter of 2022. The economy was already under pressure from a downturn in real estate and weakening global demand for Chinese goods. .

The central bank kept its benchmark lending rate unchanged for a third straight month on Monday as a weaker yuan and sustained capital outflows limited the Chinese government’s ability to ease monetary terms to support the economy.

The government has rolled out a series of policy measures in recent months to support growth, focusing on infrastructure spending and limited support for consumers, easing financing restraints to save the real estate sector. there is

On Wednesday, the PBOC released a notice outlining 16 steps to help the real estate sector, including extending loan repayments, as a key push to ease the liquidity crisis that has plagued the sector since mid-2020. has been issued.

Chinese cities are imposing lockdowns and other restrictions to curb a new surge in new coronavirus cases, bleak economic prospects and China’s tough and unusual stance on COVID any time will be significantly eased. We are weakening the expectation that

The economy grew just 3% in the first three quarters of this year, well below its annual target of about 5.5%. Full-year growth is widely expected by analysts to be just over 3%.



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