CHINA’S central bank unleashed a blitz of policy support for the economy, as policymakers make their broadest push so far to hit this year’s annual growth target of about 5 per cent.
People’s Bank of China (PBOC) governor Pan Gongsheng announced a series of stimulus measures at a rare briefing on Tuesday (Sep 24) in Beijing, including moves to boost banks’ lending to consumers and corporates, and a cut to its key short-term interest rate. China will also lower the mortgage rate for existing housing loans.
“Monetary policy easing come bolder than expected, with both rate cuts and RRR (reserve requirement ratio) cuts announcing at the same time,” said Becky Liu, head of China macro strategy at Standard Chartered. “We see room for bolder easing ahead in the coming quarters, following the Fed’s outsized rate cuts.”
The offshore yuan weakened 0.1 per cent as the PBOC announced the cuts. China’s 10-year government bond yields declined to 2 per cent, a fresh record low.
The RRR, or the amount of cash banks must keep in reserve, will be lowered by 0.5 percentage points. That will unleash one trillion yuan (S$183 billion) in liquidity, Pan said. China may also cut the RRR further this year by another 0.25 to 0.5 percentage points at the appropriate time, he added.
The seven-day reverse repurchase rate will be lowered to 1.5 per cent from 1.7 per cent.
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President Xi Jinping’s government has enacted piecemeal rate cuts that have so far failed to arrest a slowdown in the world’s No 2 economy, with growth weakening further after grinding to its worst pace in five quarters. That deterioration is testing the Chinese leadership’s tolerance for missing its high-profile annual target for the second time in three years, at a moment when investor confidence is waning.
China’s property rescue package unveiled in May has failed to turn around a years-long real estate slump that’s wiped out an estimated US$18 trillion in wealth from households. Only 29 cities out of 200 urged to participate are heeding Beijing’s call to help absorb an excess of housing. New home prices clocked their biggest decline last month from July since 2014.
The central bank governor made the latest announcement at his first high-profile press conference since March, when he defended the government’s growth goal of about 5 per cent alongside other top economic officials.
The PBOC chief has displayed a more transparent approach to policy this year, in a bid to stabilize sentiment. Pan used a similar briefing in January to announce a cut to the amount of money banks must hold in reserve two weeks ahead of time, as authorities tried to halt a US$6 trillion stock-market rout. BLOOMBERG
