China's Careful Boost

Sebastien Callebaut -

China moved to cut the amount of money banks needs to hold in reserve

Friday the People's Bank of China announced that it would cut the reserve requirement ratio (RRR) for all banks by 50 basis points. The move is expected to inject around 1 trillion yuan (or $154 billion) of long-term liquidity into the economy. In the short term, this could stimulate liquidity-sensitive sectors such as aerospace and defense, electronics, IT and media.

The move by the Chinese central bank on Friday signals that the country recognizes the risks to China's growth. UBS analysts pointed out that investors are worried about the slowing pace of China's economic recovery in the second and third quarter of this year.

“It is a signal, it’s a higher profile message I think, that the authorities are paying attention and alert to the possibility of downside risks” Andrew Tilton by Weizhen Tan for CNBC

BENCHMARK'S TAKE

  • China's growth trajectory was adversely hit by the pandemic
  • This comes at a critical time as it is fighting with considerable demographic changes and a rapidly evolving technological landscape
  • After months of attacks on its technological leaders, the country is showing that it is still there to support its markets and provide the help economically-sensitive companies require

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Peiheng Yang on Unsplash.