China Acts to Shore Up Economy Amid Weight of Trade War



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China’s central bank on Sunday freed its banks to lend more in the latest sign that officials are worried about the economy as it faces headwinds from a worsening trade war with the United States.

The People’s Bank of China cut the amount of money that some lenders are required to hold in reserve — called the reserve ratio — by one percentage point, which will effectively pump $110 billion into the economy. This is the fourth time this year that the central bank has cut the reserve ratio, though this cut was bigger and broader than previous ones.

The central bank said in a statement that it would cut the reserve ratio rate, effective Oct. 15, to ensure “reasonable and sufficient liquidity” in China’s economy. The move comes as officials have warned that trade frictions with the United States could shave as much as nearly one percentage point from China’s annual economic growth.

In September, the United States imposed tariffs on $200 billion worth of goods from China, dealing it a blow at a time when the country’s economy was already flagging.

Chen Shouhong, the founder of Gelonghui, an investment information platform, said that for the central bank to cut the reserve ratio, the economy “really is not doing well.” He wrote on WeChat, “There are fewer and fewer tools in the PBOC toolbox.”

Ailin Tang contributed research.

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