by Hannah Bogorowski
China’s central bank announced late Sunday that it is planning to unleash nearly 700 billion yuan ($107.5 billion) into the financial system by cutting the amount of cash some banks must hold as reserves by 50 basis points.
The People’s Bank of China (PBOC) said on Sunday that the latest reduction in some banks’ reserve requirement ratios (RRRs), currently 16 percent for large banks and 14 percent for smaller banks, will take effect on July 5, according to CNBC.
“This move will help support the real economy and stabilize financial markets. We’ve seen rising debt defaults and funding strains on small firms, as well as a sharp adjustment in the capital market,” Beijing’s chief economist at Zhongyuan Bank, Wang Jun said.
Sunday’s announcement followed the worst weekly loss in the country’s stock market since February, as President Donald Trump’s threatening trade war looms over the country.
China’s net exports were already lagging in growth for the first quarter, according to analysts at CNBC, emphasizing the need for strong and stabilized economy before the tariffs hit.
This latest RRR cut will take effect a day before the awaited tariffs will be applied, as China and the United States are set to start collecting tariffs on specific goods on July 6.
China and the U.S. have announced $50 billion in tariffs on each other’s goods, and Trump has threatened to tack on another $200 billion on more of China’s products.
Haibin Zhu, chief China economist at JPMorgan, estimates that U.S. tariffs on Chinese exports could decrease Chinese economic growth by between 0.1 and 0.5 percentage points, depending on the intensity of the tariffs.
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Hanna Bogorowski is a reporter at Daily Caller News Foundation. Follow Hanna on Twitter.