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China said it would cut its benchmark interest rates, cut the amount needed by banks to hold them as delivery, and provide support for the economy in the face of a trade war with the US.
According to People’s Bank of China Gongsheng, governor of the People’s Bank, China will reduce the bank’s reserve requirements ratio by 0.5 percentage points, reducing some key interest rates and freeing long-term liquidity into the banking system.
Speaking at a press conference on Wednesday alongside officials from two other financial regulatory bodies, Pan said the central bank will cut its seven-day reporate by 0.1 percentage points, reducing refinance loan deposits and other interest rates.
Beijing introduced measures amid the trade war with the United States, which is beginning to be raided by the country’s vast manufacturing sector as many export orders have been cancelled and factories are beginning to slash worker and cut production.
Beijing and Washington said Wednesday that they will hold their first trade talks since US President Donald Trump launched a trade war with China.
The trade war is because China has already fought weak domestic demand and has forced Beijing to a continuous wave of monetary policy easing since last year.
Pan said the latest measure was due to “uncertainty in the global economy, economic fragmentation and trade tensions disrupt the global industrial supply chain.”
A reduction in the bank’s reserve requirements ratio means that the weighted average across the sector will fall from 6.6% to 6.2%, Pan said.
PBOC also reduces the reserve requirements ratio for financial leases and vehicle finance companies from 5% to zero.
Pan said the cost of borrowing from a government-led program to buy a home has been reduced by 0.25 percentage points, which will “help the strict housing needs of residents and help stabilize the real estate market.”
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Li Yunze, director of the National Financial Regulation Authority, a financial sector watchdog, said China will implement new measures to support exporters “with the aim of stabilizing business and helping to expand the market.”
He added that it will announce new funding mechanisms to support the sick real estate sector and expand its pilot programme to allow China to flow more funds from insurers into the stock market.
“We are fully leveraging the benefits of insurance funds as patients, long-term capital, allowing us to enter and stabilize the market with greater strength,” Li said.
Hong Kong’s Hang Sen Index rose 2.2% shortly after its opening, while mainland China’s CSI 300 index rose 0.7%. The free-traded offshore yuan weakened 0.1% to Rmb7.21 per dollar.
Additional Reports by Wenjie Ding in Beijing
