China's central bank plans to reduce the ratio of reserves banks must keep on hold as part of a slew of measures to support its slowing economy
BANGKOK — China’s central bank said Wednesday it will cut amount of reserves it holds for banks as part of a slew of measures to support the slowing economy.
The announcement by the governor of the People’s Bank of China prompted a surge in share prices, with Hong Kong’s benchmark jumping 3.6%.
Chinese stock markets have languished in recent months as investors pulled money out, discouraged by a faltering recovery from the shocks of the COVID-19 pandemic.
A sell-off earlier in the week was followed by unconfirmed reports that the government planned to get state-owned investment companies to funnel offshore funds into the markets to help staunch the losses. The central bank's moves appear to be part of a concerted effort to stabilize the markets and instill greater confidence in the outlook for the world's second-largest economy.
Central bank Gov. Pan Gongsheng told reporters in Beijing that the deposit reserve requirement would be cut by 0.5 percentage points as of Feb. 5. Pan said that would inject about 1 trillion yuan ($141 billion) into the economy. As of December, the reserve requirement ratio was 7.4%.
Unlike bank reserves — the cash banks must keep on hand to cover unexpected demand — these reserves are held by the central bank and used mainly as a monetary policy tool.
Such changes are usually conveyed in a written notice by the central bank, not at a news conference.
Pan said the central bank also plans to issue a policy soon on lending to property developers to help support the industry.
China's economy is recovering, he said, allowing ample room for policy
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