BEIJING: China’s central bank on Tuesday (Sep 24) unveiled a raft of measures to boost the country’s struggling economy, cutting the amount of cash banks must hold in reserve and lowering a key interest rate.
China’s economy, the world’s second-largest, has yet to achieve a highly anticipated post-pandemic recovery as it is battered by a prolonged property sector debt crisis, continued deflationary pressure and high unemployment.
The country’s leadership has set a goal of five per cent growth in 2024, an objective analysts say is optimistic given the headwinds the economy is facing.
On Tuesday, central bank chief Pan Gongsheng told a news conference in Beijing that it would cut a slew of rates in a bid to boost growth.
China will “reduce the reserve requirement ratio and the policy interest rate, and drive the market benchmark interest rate downward”, Pan said.
“The reserve requirement ratio will be cut by 0.5 percentage points in the near future,” he said.
The move will inject around a trillion yuan (US$141.7 billion) in “long-term liquidity” into the financial market, he said.
Beijing would “lower the interest rates of existing mortgage loans and unify the down payment ratios for mortgage loans”, he added.
It will also “guide commercial banks to lower the interest rates of existing mortgage loans to the vicinity of the interest rates of newly issued loans”.
Shares in Hong Kong and Shanghai rallied at the open Tuesday after China unveiled the measures.
Property and construction have long accounted for more than a quarter of China’s gross domestic product, but the sector has been under unprecedented strain since 2020, when authorities tightened developers’ access to credit in a bid to reduce mounting debt.
Since then, major companies including China Evergrande and Country Garden have teetered, while falling prices have dissuaded consumers from investing