China cuts banks' reserve requirements, Latest World News

Posted October 16, 2018

The country's central bank, People's Bank Of China (PBOC), said it would cut the reserve requirement ratio by one percentage point from October 15 to make sure there is reasonable supply of credit for economic development.

The market's obliviousness toward the RRR cut - China's central bank said the move would inject a net 750 billion yuan ($109.2 billion) in cash into the banking system - highlights concerns that monetary easing alone would do little to heal battered confidence.

China's central bank will cut the reserve requirement ratios (RRR) by one per cent from October 15 which will inject a net United States dollars 109.2 billion in cash into the banking system.

But citing trade policy tensions, the International Monetary Fund cut its global economic growth forecasts for 2018 and 2019 on Tuesday, and predicted that China could face particularly severe consequences in the event of an all-out US-China trade war.

Pence intensified Washington's pressure campaign against Beijing on Thursday by accusing China of "malign" efforts to undermine US President Donald Trump ahead of November's congressional elections and reckless military actions in the South China Sea.

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Telecoms equipment maker ZTE led tech shares downward on Monday, falling 8.14% to 16.81 yuan after a Bloomberg News report last week said China had inserted special microchips into computer goods exported to the U.S. to steal technology secrets.

The nation's stock market had already lost $2.4-T in value since January before Monday on signs that deleveraging and a trade dispute with the USA is hurting economic growth.

"Some of the difficulties encountered by enterprises are brought about by trade frictions and some due to China's economic transformation", Ning said.

"Compared with the RRR level of 9.5 percent in 2007, there is still room for further reduction in the current ratios of 14.5 percent for large financial institutions and 12.5 percent for small and medium-sized lenders".

However, it has since stabilized with the PBoC increasing liquidity support and maintaining ample liquidity.

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The PBoC also reiterated that China's M2 money supply growth will be kept stable and the RRR cut will not fuel depreciation pressure on the yuan's exchange rate.

These cuts follow a year of lackluster momentum in the economy as the government tried to rein in its high levels of debt through tax cuts, infrastructure spending and weak monetary policy, in addition to growing pressure from United States trade tariffs.

Fixed-asset investment is growing at the slowest pace on record, while non-performing loans surged in the second quarter and defaults climbed.

"Liquidity is flush in the banking system". The key question is how to channel cash to the real economy.

But the RRR cut did little to calm nerves when stock markets in Greater China stumbled at the start of the week's trading.

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