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China has said it will lower its interest rate and reduce the amount of money banks should keep as reserves, providing support to the economy in the face of a commercial war with the US
China will reduce the ratio of bank reserve requirements by 0.5 percentage points and reduce some key interest rates to issue RMB1TN (138BN) of long -term liquidity in the banking system, said Pan Gongsheng, Governor of the People’s Bank of China.
PAN, speaking at a press conference Wednesday along with officials from two other financial regulatory agencies, said the Central Bank will lower the seven-day repos rate by 0.1 percentage points to 1.4 percent and reduce deposits and other interest rates on loan refinancing.
Beijing revolved the measures between a war of trade bruising with the US that has begun to hit the wide sector of production of the country, with many canceled export orders and factories that begin to do the workers and reduce production.
Beijing and Washington said on Wednesday that they would conduct their first commercial talks since US President Donald Trump launched a trade war against China, as both sides seek a way to reduce punitive tariffs.
The trade war comes as China is already struggling with poor domestic demand, forcing Beijing in successive monetary policy waves that have facilitated last year.
Pan said the latest measures were due to “the uncertainties of the global economy, economic fragmentation and trade tensions, which disrupted the global industrial supply chains”.
The reduction in the bank Reserve Request Request (RRr) report will reduce the weighted average throughout the sector from 6.6 percent to 6.2 percent, Pan said.
Analysts say coordinated policy announcements reflect Beijing’s desire to support its economy and increase market confidence before the US-KINI negotiations over trade.
“The time of the package is closely linked to American trade-to-Kina talks,” said Lynn Song, chief economist for Greater China in Ing. “Adjusting mitigating measures now helps to avoid the appearance of a sharp knee response to tariffs.”
The PBOC will also cut the RRR for financial renting and vehicle finance companies from 5 percent to zero, an action that would issue capital and improve their borrowing capacity.
The cost of securing long -term loans from a government -led program for housing purchases would be cut at 0.25 percentage points to 2.6 percent, PAN said to “support the solid needs of residents’ housing and to help the assets market”.
Li Yunze, Director of the National Administration of the Financial Regulatory, the Financial Sector Supervisor, said China will take new measures to support exporters “with the aim of stabilizing their operations and helping them expand their markets.”
He added that China would also discover new funding mechanisms to support the sick real estate sector and expand a pilot program to inject more funding from insurance companies to flow into the stock market.
“We are fully utilizing the advantages of insurance funds as patient, long -term capital and we will allow it to enter and stabilize the market into greater strength,” Li said.
Robin Xing, China’s chief of China in Morgan Stanley, said the general stance of policies remained “reactive and focused on supply”, and as such could only compensate for parts of the shock. But he said the package beat “market expectations and showed room for further relief as needed.”
“Cutting RR is one of the vital movements to soften
Economic impact (tariffs), “said Jianwei XU, an old economist for the Great China in Natixis, on a panel on Wednesday.” But stimulus measures must be massive this year to achieve the 5 percent GDP target of China. “
The Hang Seng Seng index of Hong Kong advanced 2.2 percent in the open, but the profits were later cut during the day. China’s CSI 300 continent index was closed 0.61 percent. Renminbi offshore, which trades freely, was flat on the day at RMB7.22 per dollar.
Additional reporting from Wenjie Ding to Beijing
