China announced a raft of supportive measures to shore up its economy and stabilise capital markets on Wednesday, in a move seen as bolstering Beijing’s position ahead of upcoming trade talks with the United States.
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Top officials from China’s central bank and financial regulators said they planned to cut interest rates, reserve ratio for banks to release liquidity into the markets, and ramp up support for consumers and businesses affected by US tariffs during a joint press conference in Beijing.
The barrage of policies “slightly exceeded” market expectations, analysts said, providing a timely boost to confidence as Beijing prepares to open formal talks with Washington over a deal to de-escalate the trade war.
“The global economy is full of uncertainties. The increasing economic fragmentation and rising trade tensions are disrupting global industrial and supply chains and stirring volatility in the international financial markets,” said Pan Gongsheng, governor of the People’s Bank of China, at the briefing.
The reserve requirement ratio – the amount of cash that commercial banks must hold as reserves – will be cut by 0.5 percentage points, allowing an extra 1 trillion yuan (US$138 billion) to flow into capital markets, according to Pan.
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China’s seven-day reverse repo rate – a benchmark interest rate – will also be lowered by 0.1 percentage points to 1.4 per cent, while the rate of housing accumulation fund loans and relending facilities rate will be slashed by 0.25 percentage points from Thursday, officials said.