China announces sweeping measures to ease policy in bid to shore up trade-war hit economy

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Title : China announces sweeping measures to ease policy in bid to shore up trade-war hit economy
Link : China announces sweeping measures to ease policy in bid to shore up trade-war hit economy

China's central bank and financial regulators announced sweeping policy steps Wednesday, including interest rate cuts, as Beijing ramps up efforts to bolster growth amid mounting trade worries. China will cut the seven-day reverse repurchase rates by 10 basis points to 1.4% from 1.5%, the People's Bank of China Governor Pan Gongsheng said at a press briefing. That will bring down the loan prime rate, the main policy rate, by around 10 basis points, the governor said.

The central bank will also lower the reserve requirement ratio, which determines the amount of cash banks must hold in reserves, by 50 basis points, unleashing additional liquidity of 1 trillion yuan ($138.5 billion) to the market. The lower policy rates will come into effects Thursday, while the RRR relaxation will be effective May 15, according to state media Xinhua.

The officials also announced measures to support financing for several key sectors, including technology and real estate, along with establishing of a 500-billion-yuan relending tool for consumption and elderly care. The PBOC will reduce the mortgage rates under the nation's housing provident fund, a government-backed housing lender, by 25 basis points. Rates on five-year loans for first-time homebuyers will be trimmed to 2.6% from 2.85%, the governor said. It will also gradually lower the amount of cash that auto financing firms must hold in reserves to zero from the current 5%. These measures, however, may have limited impact on boosting domestic credit demand, said Tianchen Xu, senior economist at Economist Intelligence Unit, as "borrowing has been somewhat insensitive to interest rates." (Ed note: Trump can win with the Tariffs, if he is given enough time.) (Read More)