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China's central bank eases monetary policy to support the economy

Do Kwik
24. 1. 2024
3 min read

China's central bank has announced a bold move to boost the economy - cutting reserve requirements for banks. This policy will free up long-term capital of 1 trillion yuan. News of this crucial change comes as China struggles to cope with economic challenges.

China's central bank has unveiled a new plan to boost the country's economic growth . Governor Gongsheng announced that from February 5, there will be areduction in the requirements for reserve ratio for banks by 50 basis points. The move will free up a record $141 billion ( 1 trillion yuan) of long-term capital to boost lenders' ability to lend and stimulate spending in the economy.

This reduction comes as the first move of its kind this year and follows two previous cuts last year. Mr Gongsheng also hinted that there is room for further monetary easing, which could lead to a modest recovery in consumer prices.

At a press conference in Beijing, Mr Gongsheng told reporters that the central bank and the National Financial Regulatory Administration are working on a new credit support policy for high-quality property developers. China's real estate woes have been closely linked to the finances of local governmentsthat relied on land sales as a major source of revenue.

These decisions by the Chinese central bank have already triggered positive reactions in the financial markets, with stocks in Hong Kong and China posting gains. The policy also came with the announcement of credit support for property developers.

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Despite the problems with real estate and the limited impact of local government debt on the economy, Mr. Gongsheng stressed that the reduction in reserve requirements was done prudently and strongly. These measures show that China's monetary policy is sensitive to stable expectations and rapid results.

At the international level, the the macroeconomic situation. While China proceeds with economic support, the US central bank is expected to cut interest rates after a previous increase.

"Such a change in the external environment is objectively beneficial to strengthening China's monetary policy autonomy and expanding the space for monetary policy operations."
Mr. Gongsheng, Governor of the Bank of China

Overall, the the actions of the Chinese central bank indicate courage and care in response to current economic challenges. This policy is expected to will boost economic growth and help China cope with the pitfalls after the pandemic.

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