BEIJING—China’s central bank is freeing up nearly $175 billion to get commercial banks to boost their lending and pay off short-term borrowings, the latest…
BEIJING—China’s central bank is freeing up nearly $175 billion to get commercial banks to boost their lending and pay off short-term borrowings, the latest effort by Beijing to lift growth in a slowing economy as its trade fight with the U. S. escalates.
In a statement Sunday, the People’s Bank of China said it would reduce the amount of reserves most commercial banks are required to hold by 1 percentage point, effective Oct. 15.
The move comes as the U. S. has imposed tariffs on $250 billion of Chinese goods and has vowed additional import taxes on $257 billion of products.
Chinese leaders are eager to get ahead of any potential economic impact of the trade spat and boost confidence in a flagging stock market, economists say. Stocks in Shanghai have sunk about 15% since the beginning of the year, while the yuan has weakened by more than 9% against the U. S. dollar since mid-April.
The central bank said the cut will free up 1.2 trillion yuan ($174.72 billion) in total. Of that, 450 billion yuan ($65.52 billion) will be for banks to repay short-term debt coming due this month and 750 billion yuan will be released into the financial market. Big Chinese banks will face a reserve-requirement ratio of 14.5%, down from 15.5% currently.
The cut in the reserve-requirement ratio, coming after a weeklong holiday on the Chinese mainland, was widely expected. Chinese leaders have already lowered banks’ reserve-requirement ratios three times this year, and rolled out fiscal measures such as reducing individual income taxes and urging local governments to boost infrastructure spending.
The latest round of U. S. tariffs on $200 billion of Chinese goods took effect last month. At the beginning of next year, the Trump administration plans to raise tariffs on these products to 25% from 10% currently.
The punitive measures are already taking a toll on Chinese manufacturing.
