He People’s Bank of China (PBOC, for its acronym in English) announced this Tuesday a package of economic measures which aim to resolve the country’s slowdown and revive its Gross domestic product (GDP) to achieve the official growth target of 5% in 2024. Thus, the governor of the organization, Pan Gongshengannounced that the reserve requirement ratio for banks would be reduced by 50 basis points, to keep it at the 2020 level, but this will help improve working capital.
Thus, China has taken significant steps by cutting several key interest rates to encourage economic growthThe rate applied to seven-day loans, which is the new benchmark, fell by 20 basis points, from 1.7% to 1.5%, being the first time in a decade that the two actions have been implemented on the same day.
On the other hand, the PBOC will reduce the interest rate of the medium-term lending facility, while prime rates will also be reduced by 20 to 25 basis points.
China’s economic measures
The central bank also decided to support the real estate sectorcutting mortgage interest rates by 50 basis points, affecting mortgages worth up to $5.3 trillion. In addition, officials will reduce the minimum down payment percentage for a second home from 25% to 15%, thus facilitating access to this type of investment.
China’s central bank is also considering setting up a fund stock market stabilization with an initial injection of up to 800 billion yuan (around 102.112 million euros) to strengthen the markets.
This fund would include a line of to exchange of 500 billion yuan and a 300 billion yuan retrocession line, with the possibility of adding another 500 billion yuan in later phases, as part of efforts to stabilize the economy.
The People’s Bank of China on Friday decided to keep unchanged the interest rates on the one- and five-year main lending facilities, considered the benchmark for lending. consumer credits and mortgages, respectively.
The monetary institution maintained the rate applied to twelve-month loans at 3.35%, while that corresponding to five-year loans it remained at 3.85%.
These figures had already been reduced by ten basis points in July, at the same time as the rate applied to short-term operations with a maturity of seven days was reduced by a tenth, from 1.8% to 1.7%, to “further strengthen countercyclical regulation and increase financial sector support for real economy“.
For its part, the PBOC also reduced its operations to 14 days by 10 bases on Monday, leaving them at an interest rate of 1.85%, and injected 74.5 billion yuan (9.512 million euros) with this instrument. In turn, it issued an additional 160.1 billion yuan (20.442 million euros) in seven days at a rate of 1.7%.
