China’s central bank today unveiled a broad package of monetary stimulus and property market measures to revive the economy which is grappling with strong deflationary pressures and in danger of missing this year’s growth target.
People’s Bank of China governor Pan Gongsheng told a news conference in Beijing that the central bank will in the near future cut the amount of cash that banks must hold as reserves – known as reserve requirement ratios (RRR) – by 50 basis points (bps).
That would free up about 1 trillion yuan ($141.93 billion) for new lending, though credit demand has been exceedingly weak.
Depending on the market liquidity situation later this year (2024), the RRR may be further lowered by 0.25-0.5 percentage points, Pan said.
The People’s Bank of China will also cut the seven-day repo rate, its new benchmark, by 0.2 percentage points to 1.5%. The interest rate on the medium-term lending facility will drop by about 30 basis points, and loan prime rates by 20-25 bps.
The property market suppor
t package included a 50 bps reduction on average interest rates for existing mortgages, and a reduction of the minimum downpayment requirement to 15% on all types of homes, among other measures.
Pan said further monetary policy easing, including another RRR cut, was on the cards later this year (2024).
The government is aiming for economic growth of around 5.0% for 2024, but some investment banks have recently lowered their forecasts for China’s growth rate this year (2024).
Stocks rose and the onshore yuan opened at its strongest level since May 2023 on today’s news.
The yield on Chinas benchmark 10-year government bond fell four basis points to 2.036%, close to the record low hit last week, while 30-year treasury futures for December delivery rose to a record high.
Source: Oman News Agency
