China has reduced its policy rate and lowered the amount of cash lenders must keep in reserve, as Beijing ramps up efforts to help an economy caught in a second trade war with the US.
The People’s Bank of China (PBOC) cut the seven-day reverse repurchase rate to 1.4 percent from 1.5 percent, PBOC Governor Pan Gongsheng (潘功勝) said at a briefing yesterday.
The central bank would also trim the reserve requirement ratio (RRR) by half a percentage point, he said.
Photo: EPA-EFE
Pan’s announcement came hours after China said it would hold its first trade talks this weekend with US officials since US President Donald Trump unleashed a 145 percent tariff on most Chinese goods.
The latest steps aim to guide borrowing costs lower and are among the 10 measures outlined by Pan, which also include rate reductions on a slew of relending tools and loans for policy banks. The RRR cut would release about 1 trillion yuan (US$139 billion) in long-term liquidity, Pan said.
The seven-day reverse repo cut would go into force today, and the RRR reduction a week later, the PBOC said in separate statements.
Pan reiterated that officials would implement a “moderately loose” monetary policy, which would translate into ample liquidity and ensure funding with relatively low financing cost.
The RRR cut could enhance the stability of bank liabilities, he said.
“The monetary package is stronger than we expected. It is a powerful signal that policymakers are committed to boosting sentiment and shoring up growth. The PBOC’s steps get the ball rolling. It’s important that the government follows up — fiscal measures are more central for stabilizing the economy, and we anticipate more measures to come,” Bloomberg Economics analysts David Qu (曲天石), Eric Zhu (朱懌) and Shu Chang (舒暢) said in a note.
China has pledged to shift to domestic demand to maintain growth, as Trump’s tariffs threaten to cripple trade with the US. Exports could well contract this year, after contributing to 40 percent of economic growth in the first quarter.
US Secretary of the Treasury Scott Bessent and US Trade Representative Jamieson Greer are to travel later this week to Switzerland for trade talks with China led by Chinese Vice Premier He Lifeng (何立峰). The plan was announced in statements on Tuesday from the Chinese and US governments.
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