China's central bank cut interest rates and made it easier for banks to increase loans on Wednesday, putting more money into the economy.
The People's Bank of China, the central bank, will cut short-term interest rates and reduce the amount of funds the bank must hold in a series of 10 measures. In a series of steps aimed at keeping the economy moving, Chinese authorities removed restrictions on auto finance companies and freed up more money to lend to various government priorities, including science and technology innovation.
He said he is implementing “moderately loose” monetary policy in the face of a global economy at the Chief Financial Officer Pan Gongsheng's briefing.
The announcement came shortly after Washington and Beijing announced that the top Trump administration officials would meet with Chinese counterparts during their trip to Geneva this week. This marks the first formal meeting on trade between the two countries as President Trump raised tariffs on China's imports to 145% almost a month ago.
The move sparked a retaliatory response from Beijing, raising its own tariffs on US imports to 125%. The conflict between the two countries put the prospects of the world's two great powers and many other countries at risk, causing world trade to kneel.
Last week, China reported a sharp monthly slowdown in manufacturing activities, which was reduced by the incursion of new orders for exports.
CSI 300, the index of large companies trading in Shanghai and Deep Shenzhen, won 0.8% on Wednesday, with Hong Kong's Hang Seng index rising by 0.2%.
The impact of the measures announced Wednesday was “positive but modest,” the investigator said in a memo. The problem is that banks can lend more money, but they may encounter inactive demand from borrowers, the report says.
Australian banking group ANZ said the aid measures are a sign that the Chinese government is concerned about achieving its 5% growth target in 2025. It said the timing of the announcement would provide a “policy buffer” before trade talks with the US.
The central bank reduced the so-called reserve requirement ratio (the amount needed to be held by the country's commercial banks) by half points, freeing up money that could be used for loans. According to state-owned media, this is expected to take effect on May 15th.
Beijing cut the ratio by half points in September as part of a package of measures to restore economic growth.
Signaling the central bank to take this step at some point in the year in March, Pan said the decline in reserve ratios is expected to provide the market with around $139 billion in long-term liquidity.
The Central Bank of China also cut its seven-day interest rate to 1.4%, starting Thursday, from 1.5%. They also reduced the fees with quarterly points on the Home Buying Program, which offers mortgage fees that are more advantageous than commercial loans.
Zixu Wang Reports of contributions.
