China moved to cut the amount of money banks needs to hold in reserve
Friday the People's Bank of China announced that it would cut the reserve requirement ratio (RRR) for all banks by 50 basis points. The move is expected to inject around 1 trillion yuan (or $154 billion) of long-term liquidity into the economy. In the short term, this could stimulate liquidity-sensitive sectors such as aerospace and defense, electronics, IT and media.
The move by the Chinese central bank on Friday signals that the country recognizes the risks to China's growth. UBS analysts pointed out that investors are worried about the slowing pace of China's economic recovery in the second and third quarter of this year.
“It is a signal, it’s a higher profile message I think, that the authorities are paying attention and alert to the possibility of downside risks” Andrew Tilton by Weizhen Tan for CNBC
- China's growth trajectory was adversely hit by the pandemic
- This comes at a critical time as it is fighting with considerable demographic changes and a rapidly evolving technological landscape
- After months of attacks on its technological leaders, the country is showing that it is still there to support its markets and provide the help economically-sensitive companies require
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