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China said it would reduce its reference interest rate and reduce the amount of money whose banks must keep as reserves, providing support to the economy in the face of a trade war with the United States.
China will reduce the reserve ratio of 0.5 percentage banks and reduce several key interest rates to release RMB1TN ($ 138 billion) long -term liquidity in the banking system, said Pan Gongsheng, governor of the governor Banque Populaire de China.
Pan, speaking at a press conference on Wednesday alongside the managers of two other financial regulation agencies, said the central bank would reduce the seven -day reference rate by 0.1 percentage point to 1.4% and reduced deposits and other interest rates for refinancing loans.
Beijing deployed the measures in the middle of a bruise Trade with the war with the United States It is starting to strike the country's large manufacturing sector, with many export orders canceled and factories starting to do workers and reduce production.
Beijing and Washington said on Wednesday that they would have their first commercial talks since US President Donald Trump launched a trade war against China, while both parties are looking for a means of reducing punishment prices.
The trade war comes while China is already fighting against low domestic demand, forcing Beijing to successive waves of the relaxation of monetary policy since last year.
Pan said that the latest measures were due to the “uncertainty of the global economy, economic fragmentation and trade tensions, which disrupted global industrial supply chains”.
The reduction in the reserve requirement rate of banks (RRR) would reduce the weighted average in the sector from 6.6% to 6.2%, said Pan.
Analysts claim that coordinated policy announcements reflect Beijing's desire to support its economy and strengthen market confidence before American-Chinese negotiations on trade.
“The time of the package is closely linked to US-Chinese trade negotiations,” Lynn Song, chief economist of Greater China, said. “Launching softening measures now helps to avoid the appearance of an instinctive response to prices.”
The PBOC will also reduce the RRR for financial rental and vehicle financing companies from 5% to zero, a decision that would release capital and improve their loan capacity.
The cost of obtaining long -term loans of a government -led program for housing purchases would be reduced by 0.25 percentage points to 2.6%, said Pan, to “meet the rigid housing needs of residents and help the real estate market to stabilize”.
Li Yunze, director of the National Financial Regulatory Administration, the childcare dog in the financial sector, said that China would deploy new measures to support exporters “in order to stabilize their operations and help them extend their markets”.
He added that China would also unveil new financing mechanisms to support the real estate sector in difficulty and extend a pilot program to inject more funds from insurance companies to flock the stock market.
“We take full advantage of the advantages of insurance funds as a patient, long -term capital and allow him to enter and stabilize the higher market,” said Li.
Robin Xing, chief economist from China to Morgan Stanley, said that the overall political position remained “reactive and centered on the offer” and could only partially compensate for tariff shocks. But he said that the package was beating “market expectations and indicated the place for additional softening if necessary”.
The “RRR cut is one of the vital movements to mitigate the
Economic impact (caused by prices), ”Jianwei Xu, main economist for Greater China in Natixis on Wednesday.
The Hong Kong Hang Seng index increased 2.2% at the opening, but the gains were reduced later during the day. The CSI 300 index of continental China increased by 0.61%. The offshore renminbi, which is freely negotiated, was flat the day at 7.22 RMB for the dollar.
Wenjie Ding additional reports in Beijing
