China’s central bank has launched a significant initiative to revitalize its struggling economy. The People’s Bank of China (PBOC) Governor announced strategies to reduce borrowing costs and facilitate increased lending from banks.
This decisive action follows a series of disappointing economic indicators, amplifying concerns that the world’s second-largest economy may fall short of its 5% growth target this year.
Asian stock markets reacted positively to the announcement, with notable gains observed across the region.
During a rare press conference with key financial regulators, the PBOC Governor revealed plans to lower the reserve requirement ratios (RRR), enabling banks to retain less cash in reserve. The initial RRR cut will free up approximately 1 trillion yuan ($142 billion), with additional reductions potentially occurring later this year.
To further bolster the distressed property market, measures include lowering interest rates on existing mortgages and reducing minimum down payments for various types of homes to 15%. The real estate sector has faced a significant downturn since 2021, resulting in numerous developer collapses and a surplus of unsold properties and unfinished construction projects.
These economic stimulus efforts by the PBOC come just days after a notable interest rate cut by the US Federal Reserve, which has influenced global market dynamics. The positive sentiment led stock prices to surge, with major stock indexes in Shanghai and Hong Kong closing over 4% higher.
