China’s Central Bank Eases Towards And End To Easing

AS EXPECTED, THE People’s Bank of China (PBOC) has made a modest reduction to the amount of cash that banks must hold in reserve in an effort to boost lending to small businesses.

The central bank will cut the reserve requirement ratio by half a percentage point, effective from July 15, taking the requirement to 12% for large banks, 10% for smaller banks and 5.5% for rural commercial banks.

The easing will inject around 1 trillion yuan ($154 billion) of long-term liquidity into the economy. It may also be a sign of concern that the recovery is faltering.

Rising commodities prices and supply chain interruptions are increasing input costs for manufacturers while local lockdowns to counter occasional Covid-19 outbreaks and still-subdued consumer spending have hit the services sector.

Second-quarter GDP figures due next week may confirm that. Consensus forecasts are for 8% year-on-year growth, down from the first quarter’s 18.3% growth, although the comparison means little because the first quarter last year was the first to be hit by the pandemic and contracted 6.8%.

As first into the pandemic, China has been first into recovery with the PBOC leading its peers in scaling back stimulus and now starting to tighten monetary policy, albeit ever so slightly and even while insisting there has been no change of stance.

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Filed under Banking, Economy

2 responses to “China’s Central Bank Eases Towards And End To Easing

  1. Pingback: Exports Sustain China’s Economic Recovery | China Bystander

  2. Pingback: China’s GDP Growth Laboured In The Second Quarter | China Bystander

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