China’s central bank has launched a $79 billion stimulus effort to help the country’s coronavirus-stricken companies on the same day other Asia-Pacific central banks looked to shore up crisis-hit markets and economies, reported the Financial Times.
The People’s Bank of China late on Friday cut reserve requirements for banks, a move that will free up an additional RMB 550 billion ($78.8 billion) in funds that the authorities want banks to lend to companies hit by the outbreak.
The PBoC, which lowered the reserve requirement ratio by 0.5-1 percentage points, said it was a “financially inclusive” cut to the amount of cash banks are supposed to hold in reserve, signalling the new funds should be directed at smaller businesses that struggle to access bank lending. Joint-stock banks, in which the government and private sector hold shares, will be allowed to lower the reserve requirement ratio, or RRR, by an additional 1 percentage point.
“We think the PBoC’s ongoing monetary easing efforts should be able to drive a pick-up in credit growth later this year, providing a tailwind to the post-virus economic recovery,” said Julian Evans-Pritchard, senior economist at Capital Economics.