China pumps $109 bn into economy amid trade war with US

15 Oct '18

2 min read

China has decided to cut the reserve requirement ratios (RRRs) by one per cent from October 15 that will inject a net $109.2 billion in cash into the banking system, its central bank recently announced. The decision came amid an escalating trade war with the United States that has increased pressure on growth in the world's second-largest economy.

The cut is the fourth by the People's Bank of China (PBOC) this year and followed Beijing’s pledge to speed up plans to invest billions of dollars in infrastructure projects as the economy shows signs of slowing down further.

Part of the generated liquidity will be used to pay back the $65 billion of the medium-term lending facility that will mature on October 15, according to a news agency.

In addition, another $110 billion in liquidity will be injected into the market for lending, the PBOC said. The RRR cut will fill in the liquidity gap of banks and put no downward pressure on the yuan as the country's monetary policy is not eased.

The RRR cut will cover the yuan deposits of large commercial banks, share-holding commercial banks, city commercial banks, non-county rural commercial banks and foreign banks. (DS)

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