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BEIJING – Beijing has called on banks to open the lending market, while the trade war between China and the United States is raging and its economic slowdown shows no signs of slowing down.
The People's Bank of China on Friday reduced the amount of liquidity that Chinese banks are required to keep in their coffers, freeing up $ 126 billion that could flow into the financial system at a significant time in political and economic terms.
The decision indicates that China is willing to mitigate some of its massive campaign to limit excessive borrowing. Years of debt-fueled growth have caused bubbles in the financial system and raised concerns about hidden bombs deep in the country's financial system.
By calling on banks to lend more to indebted local businesses and governments, he hopes to stimulate growth. Many businesses struggle to keep their doors open, unemployment rises, and families pay higher daily costs.
Nevertheless, the decision was relatively modest in relation to the size of the Chinese economy. At the same time, a one-year trade war with the United States has worsened China's economic situation.
A growing number of economists have reduced their expectations for economic growth next year, with the trade war showing no sign of ending.
"Policy development in the case of China tends to lag behind, which means that in an ideal world, the government should do more to support the economy. These policy measures are too light and insufficient to stop the slowdown, "said Larry Hu, chief economist of the Macquarie Group for China.
Hu said he plans to revise downward its growth forecast in 2020, going from an initial estimate of 6% to less than 6%. Wang Tao, an economist at Swiss bank UBS, said he expects growth to slow to 5.5 percent next year.
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