Chinese authorities issue new currency support to boost growth

investmentweek.co.uk:

The renminbi has continued to slide against the dollar throughout the year as the country’s expected economic recover has been weaker than first forecast.

In a statement today (1 September), the Chinese central bank said it would be cutting the reserve requirement ratio for foreign exchange deposits of financial institutions by two percentage points, bringing the rate down from 6% to 4%.

The changes, which will come into effect on 15 September, are meant to «improve the ability of financial institutions to use foreign exchange funds», the central bank said.

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Upon its implementation, commercial banks will be able to cut the interest rates that they provide for dollar deposits, making it less attractive to convert renminbi into dollars.

The renminbi has continued to slide against the dollar throughout the year as the country's expected economic recover has been weaker than first forecast.

It has dropped 5.1% against the dollar over the last year but rose by 0.2% following the announcement, according to data from MarketWatch.

Earlier this week (30 August), Chinese regulators, including the PBoC, pledged to improve private businesses' access to funding, with PBoC governor Pan Gongsheng saying that private firms will have smooth access to funding via sales of bonds, equities and loans.

He said the PBoC and other authorities will expand bond financing support for the country's private sector, and encourage institutional investors to buy more bonds sold by private companies.

Additionally, the PBoC said today it would be conducting CNY 100bn (£10.9bn) of reverse repo operations through interest rate bidding at 1.8%.

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