PBOC lowers bank reserves to 17% in hopes to pump money into economy
The People’s Bank of China is turning on the stimulus tap.
The central bank has lowered the amount of cash that commercial banks must keep on reserve by half a percentage point to 17%, a change that will take effect on Tuesday.
The PBoC hopes banks will instead pump the money into the Chinese economy. Slashing the “reserve-requirement ratio” is one of the primary tools used by the central bank to boost growth.
Analysts at Capital Economics said the cut could mean that concerns over the rush of money flooding out of China have eased. Experts estimate that hundreds of billions of dollars — perhaps as much as $1 trillion — left the country last year.
Investors have been trying to get at least some of their money out as the value of the yuan plummets. Many see better opportunities abroad, whether it’s in real estate or foreign markets.
Confidence hasn’t been helped by a struggling real estate market and steep drops in Chinese stocks. The Shanghai Composite, which has lost nearly a quarter of its value this year, shed another 2.9% Monday.
