China’s Set to Release US$70 Billion to Boost Economy

Carri Insights China’s Set to Release US$70 Billion to Boost Economy

China said on Friday it would cut the amount of cash that banks must hold as reserves for the second time this year, releasing about 500 billion yuan ($69.8 billion) in long-term liquidity to prop up the faltering economy.

The People’s Bank of China (PBOC) said it would cut the reserve requirement ratio for banks by 25 basis points (bps), effective from Dec. 5. That would lower the weighted average ratio for financial institutions to 7.8%, the central bank said.

The PBOC has been walking a tightrope on policy, seeking to support the slowing economy but eager to avoid big rate cuts that could fuel inflationary pressures and risk outflows from China as the Federal Reserve and other central banks raise interest rates to fight inflation.

The world’s second-largest economy suffered a broad slowdown in October, and a recent spike in COVID-19 cases has deepened concerns about growth in the last quarter of 2022. The economy was already under pressure from a property downturn and weakening global demand for Chinese goods.

The economy grew just 3% in the first three quarters of this year, well below the annual target of around 5.5%. Analysts widely expect full-year growth to be just over 3%.


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