China’s central bank has decided to cut the reserve requirement ratio, the amount of cash commercial banks are required to hold. Central bank Governor Pang Kunsheng said the reserve requirement ratio would be cut by half a percentage point from February 5, releasing about one trillion yuan into the economy. It is the most significant reduction in reserve requirements since the end of 2021, Reuters reported today.
Revival
The Chinese economy’s recovery from the downturn caused by severe coronary restrictions is still hampered by the property market crisis, as well as local government debt problems and weak global demand. This in turn has negative implications for investor interest in Chinese assets.
“The downgrade is a sign that China’s central bank will continue its easy approach to monetary policy this year,” said Xu Tianchen, an analyst at the Economist Intelligence Unit. “It’s also a sign that policymakers in the government want to give the economy a good start with increased support. This is needed to achieve their ambitious growth target in this difficult year,” he added.
Stock Exchange
Hong Kong’s main stock market index gained 3.6 percent today thanks to the central bank’s decision. It recorded its strongest rise in more than two months. Stock markets in mainland China closed today’s trading ahead of the central bank’s announcement.
Last year, China’s stock market fell about 13 percent and continued to decline at the start of this year. In fact, foreign investors continued to sell Chinese stocks.
Analysts say further measures will be needed this year to support China’s economy, which is the world’s second largest after the United States. Economists forecast economic growth in China will slow to 4.6 percent this year from 5.2 percent last year, according to a Reuters poll.
Source: ČTK
