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China cuts reserve requirements for bank to help boost slowing economy

The People’s Bank of China will cut the ratio of reserves banks must hold to help boost the slowing economy (AP)
The People’s Bank of China will cut the ratio of reserves banks must hold to help boost the slowing economy (AP)

China’s central bank has announced it will cut the ratio of reserves banks must hold to help boost the slowing economy.

The announcement by the People’s Bank of China prompted a surge in share prices in Chinese markets, with Hong Kong’s benchmark jumping 3.6%.

Chinese stock markets have languished in recent months as investors pulled money out, discouraged by a faltering recovery from the shocks of the Covid-19 pandemic.

A sell-off earlier this week was followed by unconfirmed reports that the government planned to get state-owned investment companies to funnel offshore funds into the markets to help staunch the losses.

The central bank’s moves appear to be part of a concerted effort to stabilise the markets and instil greater confidence in the outlook for the world’s second-largest economy.

Central bank governor Pan Gongsheng said the deposit reserve requirement would be cut by 0.5% as of February 5.

Mr Pan said that would inject about one trillion yuan (more than £110 billion) into the economy.

He told reporters in Beijing that the central bank also plans to issue a policy on lending to property developers to help support the industry.

China’s economy is recovering, he said, allowing ample room for policy manoeuvres.

He told a government website: “At present, our country’s financial risks are generally controllable, the overall operations of financial institutions are sound, and financial markets are operating smoothly.”