China’s central bank announced a flurry of new policy measures on Wednesday to support an economy buffeted by China’s trade war with the United States.
Newsweek reached out to the Chinese embassy in the U.S. via email for comment.
Why It Matters
President Donald Trump‘s 145-percent blanket tariff on Chinese goods and China’s reciprocal 125-percent tariff on American imports are roiling global supply chains. Trump says the tariffs are needed to end “unfair” treatment, reduce the trade deficit with China, and revive manufacturing in the U.S.
China’s export-driven economy is already grappling with a property sector crisis, indebted local governments, and falling consumer prices. The U.S. tariffs threaten to deepen these strains as desperate Chinese manufacturers slash prices to clear goods marked for export that are piling up in warehouses.
What To Know
At a press conference on Wednesday, People’s Bank of China Governor Pan Gongsheng and other officials unveiled 10 measures intended to stabilize the economy and bolster financial markets.
As part of its efforts to boost liquidity and shore up confidence, the central bank said it will cut the required reserve ratio—the proportion of deposits that banks must hold in reserve—by 0.5 percentage points for eligible financial institutions starting May 15.
Governor Pan Gongsheng said the move would unlock around 1 trillion yuan ($137 billion) in liquidity, expanding banks’ capacity to lend and support business activity.
Officials hope that increased lending and spending will help ease deflationary pressures that have dragged down prices, squeezed company profits, and weakened consumer confidence.
The People’s Bank of China is also lowering its seven-day reverse repo rate to 1.4 percent from 1.5 percent, effective May 8, aiming to reduce short-term borrowing costs for banks and stimulate credit growth.
The central bank announced a 0.25 percentage point cut in interest rates on personal housing provident fund loans, starting Thursday. These preferential home loans will be available to urban employees who regularly contribute to China’s mandatory housing savings program.
Pan said the rate cut is expected to save homeowners more than 20 billion yuan ($2.75 billion) annually in interest costs, easing the financial burden on households, amid recent signs of fragile recovery in the property markets of China’s top-tier cities.
What People Are Saying
People’s Bank of China Governor Pan Gonsheng told reporters: “The People’s Bank of China will continue to earnestly implement the directives of the Party Central Committee and the State Council, pursue a moderately loose monetary policy, and strengthen the control and adjustment of monetary policy in line with domestic and international economic and financial conditions.”
Edward Hsieh, an associate research fellow at the Taiwan Academy of Banking and Finance’s Financial Research Institute, told Newsweek: “You can see that after the policy announcements, there hasn’t been a significant stimulating effect on the stock market; there was no major surge in stock prices.
“Moreover, another reason why the People’s Bank of China dares to cut interest rates at this time is that the U.S. dollar has recently been relatively weak, making them less worried about capital outflows caused by the rate cut.”
What Happens Next
After weeks of contention on both sides, U.S. Treasury Secretary Scott Bessent is set to meet with Chinese trade czar He Lifeng on Saturday and Sunday in Switzerland for the first official round of trade talks.
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