China ramps up campaign to boost fragile economy, currency
China intensified efforts to stimulate the economy and support its currency, as investor concerns over the growth outlook persist.
The central bank will trim the amount of foreign currency deposits banks are required to hold as reserves for the first time this year, the People’s Bank of China said Friday. The move came hours after authorities announced fresh stimulus for the beleaguered property sector and unveiled plans to expand tax breaks for child and parental care and education.
The steps are the latest efforts to shore up confidence in the world’s second-largest economy, which is sagging under the weight of the persistent housing crisis, waning global demand and rising unemployment. Authorities have so far resorted to a drip-feed of targeted measures, avoiding the big-bang stimulus approach they deployed during the 2008 global financial crisis amid concerns over elevated debt levels.
“The policy package exceeds market expectations,” said Zhaopeng Xing, senior China strategist at Australia & New Zealand Banking Group Ltd. “Confidence will be boosted in the near term. We still need more evidence to confirm if it marks a turnaround.”
Financial institutions will need to carry just 4% of their foreign exchange deposits in reserve starting Sept. 15, the PBOC said, compared to the current level of 6%.
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The move effectively boosts the amount of foreign currency available in the local market, making it relatively more appealing for traders to buy the yuan.
As the number of stimulus measures mounts,
