Monetary Easing Measures
China’s central bank governor, Pan Gongsheng, is set to address key monetary policies in response to recent economic pressures. Following the U.S. Federal Reserve’s rate cut, the People’s Bank of China (PBOC) has introduced aggressive measures, including a 50 basis point reduction in banks’ reserve requirement ratio (RRR), releasing 1 trillion yuan ($142 billion) for lending.
Interest Rate Reductions
In addition, the PBOC has lowered its 14-day reverse repo rate by 10 basis points to 1.85%. This comes after earlier cuts in short-term rates and the 7-day reverse repo rate, which had dropped to 1.7% in July.
Economic Impact and Challenges
These actions aim to stimulate credit demand, which has remained weak despite multiple interventions in China. China is targeting 5% GDP growth in 2024, but slowing demand and a property market crisis have caused concerns. Housing prices, for instance, declined at the sharpest rate in nine years this August.
Global and Domestic Effects
The PBOC’s moves follow the U.S. Fed’s cut to its funds rate, currently at 5.25%–5.5%. China‘s easing of monetary conditions, while supportive domestically, must also balance pressures on the yuan, which recently hit a 16-month high against the U.S. dollar.
By addressing liquidity and mortgage burdens, China‘s leadership hopes to regain economic momentum, especially with global pressures rising.
This communication is for informative purpose only. Damalion focused on advising families for wealth preservation by identifying opportunities and challenges. Please contact your Damalion expert now
