But analysts expect further support measures to follow.
We will create a favorable monetary and financial environment for the operation of financial markets, including capital markets.
The 50 basis point cut in the reserve requirement ratio (RRR) is expected to inject RMB 1 trillion (US$140 billion) worth of liquidity into the market, People’s Bank of China Governor Ban Gongsheng said at a press conference in Beijing on Wednesday. said.
“The People’s Bank of China will strengthen the countercyclical and intercyclical adjustment of monetary policy instruments, strive to stabilize markets and confidence, and strengthen and strengthen the positive recovery of the economy,” Ban said.
“We will create a favorable monetary and financial environment for the operation of financial markets, including capital markets,” he said.
Mr. Pan said China still has plenty of room to work on the policy front, with the country’s average RRR of 7.4%, meaning it has more policy room compared to developed countries. He added that RRR remains a useful tool for medium- to long-term interbank liquidity.
“Growth is nothing special”: 7 points to glean from China’s economic data
“Growth is nothing special”: 7 points to glean from China’s economic data
He added that with markets expecting interest rate cuts this year, a change in policy from the US Federal Reserve would also free up Beijing’s hands.
The decline in market confidence has raised questions about whether the Chinese government can achieve a solid economic recovery this year. It also threatens President Xi Jinping’s ambitions to build China into a financial superpower.
On Wednesday, Chinese state-run newspapers doubled down on calls for financial security and quality development.
Finance is the bloodline of the national economy and an important part of a country’s core competitiveness.
“Finance is the lifeblood of the national economy and an important part of the nation’s core competitiveness,” the People’s Daily, the mouthpiece of the ruling Communist Party, wrote in a front-page article.
The article does not mention a bailout package, but repeatedly cites Xi’s instructions to step up financial support for the real economy, technological innovation, and financial security.
The state-run Economic Daily also stated that financial stability is the basis for high-quality economic development.
02:31
China’s GDP: Beijing’s long to-do list for economic growth in 2024
China’s GDP: Beijing’s long to-do list for economic growth in 2024
“Economy is the body and finance is the blood. The two coexist and prosper together,” the commentary said on Wednesday.
The China Securities Regulatory Commission said on Tuesday it would bring in more institutional investors with long-term holdings and avoid policy announcements that could hurt market expectations.
Goldman Sachs estimates that global mutual funds and hedge funds hold about $1.75 trillion in Chinese stocks.
If consumption and the real estate market are weaker than expected after the Chinese New Year, interest rates could be cut.
This total represents a historically low 6.2% of holdings, lower than 10% last year and 15% in 2021, Liu Jingjing, the firm’s chief China equity strategy analyst, said on Tuesday. Said in Hong Kong.
The Chinese government’s decision to hold off on cutting interest rates earlier this month, when market sentiment soured, sparked market speculation about Beijing’s policy intentions.
” [RRR] “While this move is helpful, restoring confidence may take more time and may require fine-tuning the regulatory environment beyond traditional fiscal and monetary stimulus,” said Natixis, senior Asia-Pacific thematic research. said economist Gary Ng.
“If consumption and the real estate market are weaker than expected after the Lunar New Year, a rate cut could be carried out.”
Ding Shuang, Greater China chief economist at Standard Chartered Bank, said the measures are more aimed at stabilizing capital market confidence, but are also beneficial to the real economy.
He said the People’s Bank of China could adopt accommodative monetary policy next month, including the option of lowering the loan prime rate, the benchmark for home loan rates in China, and then lowering the policy rate for medium-term lending facilities. added.
After Governor Pan announced the RRR cut, Hong Kong’s Hang Seng Index widened its rise from 2% to about 4%. It ended up closing 3.56% higher on Wednesday.
Meanwhile, the benchmark Shanghai Composite Index closed 1.8% higher on Wednesday.
Additional reporting by Amanda Lee