Beijing January 24 2024: China’s central bank announced a deep cut to bank reserves on Wednesday, in a move that will inject about $140 billion of cash into the banking system and send a strong signal of support for a fragile economy and plunging stock markets.
The central bank’s announcement, coming just as stock markets were closing for the day, led to a bounce in benchmark stock indexes, and the yuan, even as analysts said more policy measures were needed.
The People’s Bank of China (PBOC) said it was making a 50-basis points (bps) cut, the biggest in two years, in the amount of cash banks must hold as reserves, effective from Feb. 5.
More importantly, PBOC Governor Pan Gongsheng said the bank would release policies on improving commercial property loans either on Wednesday or Thursday night, giving hope to investors who have been frustrated by China’s efforts to put a floor under a real estate sector that underpins consumption and household wealth.
The first cut in banks’ reserve requirement ratio (RRR) this year comes as the world’s second-largest economy struggles to mount a strong post-COVID recovery amid a housing crisis, local government debt risks and weakening global demand.
It also comes just days after China’s benchmark indexes, hit 5-year lows as even the last hopeful investors waiting for clarity and an eventual economic rebound appeared to be giving up on the $9 trillion market.
