2023-09-01 14:40:29
China has stepped up its efforts to stimulate the economy and prop up its currency, as investors remain concerned regarding the growth outlook.
The People’s Bank of China (the central bank) said today, Friday, that it will reduce the amount of foreign currency deposits that banks must keep in the form of reserves for the first time this year.
The move came hours following authorities announced new stimulus for the struggling real estate sector, and revealed plans to expand tax breaks for child and parental care and education targets.
These steps are the latest efforts to boost confidence in the world’s second-largest economy, which is reeling from an ongoing housing crisis, slumping global demand and soaring unemployment.
Chinese authorities have so far resorted to graduated stimulus through targeted measures, avoiding the massive stimulus approach they used during the 2008 global financial crisis amid concerns regarding rising debt levels.
“The policy package is exceeding market expectations,” said Zhaoping Xing, chief China strategist at Australia & New Zealand Banking Group. “Confidence will be boosted in the near term. We still need more evidence to confirm whether it represents a turnaround.”
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The People’s Bank of China said financial institutions should keep only 4% of their foreign currency deposits in reserve from Sept. 15, compared with the current level of 6%. This move effectively enhances the amount of foreign currency available in the domestic market, effectively boosting the value of the yuan.
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