The Chinese central bank loosens its monetary policy. With it she wants to meet the weakening economy.
The minimum reserve ratio should fall by 0.5 percentage points as of 16 September. For some banks, the rate in two steps even falls by a whole percentage point. This was announced by Beijing People's Bank of China (PBOC). These changes are expected to come into effect in mid-October and mid-November.
The minimum reserve ratio specifies the proportion of deposits Chinese banks must deposit with the central bank. The lower the rate, the more credits the banks can spend on consumption and investment. It is the third time this year that the central bank reduces the rate. The reserve requirements have been lowered seven times since the beginning of 2018.
Loans to small and medium-sized companies
The PBOC now calls a volume of 900 billion yuan (about 114 billion euros), which will be released to liquidity. The central bank assured that a strong monetary easing was not to be expected. Instead, monetary policy will remain "prudent," she repeated a standard phrase from previous years. A flooding of the economy by cheap money should not exist.
The communist leadership in Beijing wants to boost lending especially to small and medium-sized companies. The ongoing US trade war and global recession risk weigh on China's economy. The central bank is trying to strengthen the economy in the world's second largest economy.
The US accuses China of deliberately weakening its currency in order to gain competitive advantages for its companies in international trade. China's large trade surplus vis-à-vis the US is a key issue that has long been held up by US President Donald Trump of the People's Republic. He regards the strong export to the US as exploitation.
