Chinese stocks soared on Tuesday following an unexpected and substantial monetary stimulus from the People’s Bank of China (PBoC).
The central bank announced cuts to the reserve requirement ratio (RRR) for banks and the seven-day repo rate, just a day after lowering the 14-day reverse repo rate.
People’s Bank of China Implements Aggressive Monetary Easing
The PBoC Governor, Pan Gongsheng, revealed a 50-basis-point cut to the bank’s reserve requirement ratio, reducing it from 10.0% to 9.5% for commercial banks.
This cut is set to inject approximately 1 trillion yuan ($140 billion) of liquidity into the banking system, allowing banks more capital to lend.
In addition to the RRR cut, Pan also announced a 0.5 percentage point reduction in existing mortgage rates, offering relief to the struggling property market.
The seven-day repo rate was slashed by 20 basis points to 1.5%, while the 14-day reverse repo rate, already lowered on Monday, saw a 10-basis-point reduction to 1.85%. These moves are seen as a clear signal that Chinese policymakers are increasingly focused on addressing the economic slowdown.
Analysts Praise PBoC’s Moves
“The rare simultaneous ...
