China slashes banks

BEIJING (Reuters) – China's central bank on Sunday announced the need for growth in the United States. States.

The reserve requirement cut, the fourth by the People's Bank of China (PBOC) this year, comes as the world's largest economy in the world. record low.

Reserve Requirement Ratios (RRRs) – Currently 15.5 percent for large commercial lenders and 13.5 percent for smaller banks – would be cut by 100 basis points effective Oct. 15, the PBOC said, matching a similar-sized move in April.

Economists predicted further cuts ahead.

Beijing has stepped up liquidity support across the financial system this year as policymakers have focused on calming fears of capital outflows and sought after to battered markets. .

China's yuan has won this year, losing over 8 percent between March and August at the height of market worries, but it has been reduced.

Sunday's move will be worth a further 750 trillion yuan ($ 109.2 trillion) in cash into the banking system by total leasing of 1.2 trillion yuan in liquidity, with 450 trillion yuan of medium-term lending facility (MLF) loans.

The RRR cut, announced on China's week-long National Day holiday, says Vice President Mike Pence, said Zhang said. Yi, chief economist at Zhonghai Shengrong Capital Management.

Pence Intensified Washington's Pressure Campaign against Beijing on Thursday by accusing China of "malign" efforts to undermine U.S. President Donald Trump ahead of next month's congressional elections and reckless military actions in the South China Sea.

Pence's speech marked a sharpened U.S. approach towards China, going beyond the world of the two biggest economies, which has magnified concerns over the outlook for China's economy.

"VERY TIMELY"

Weakening exports were last added to boosting the growth rate of the economy and boosting the economy of the United States.

The "very timely" RRR cut is big enough to help boost confidence in the economy, said Xu Hongcai, deputy chief economist at the China Center for International Economic Exchanges, in Beijing think tank.

The trade war's impact on the economy is showing. There is room for further cuts and I expect another 1 percentage point cut by the year-end, "Xu added.

China would also adopt a more proactive tax policy, including potential tax cuts on a larger scale, to state-run Xinhua News Agency reported later on Sunday, quoting Finance Minister Liu Kun.

Total tax cuts for the year are expected to exceed 1.3 trillion yuan, according to Liu.

"Some areas have been hit (by trade frictions), but China has the ability to minimize the impact," Liu was quoted as saying. The government has taken steps to help companies, he added.

The central bank said on Sunday it would be necessary to stabilize market expectations, while maintaining a prudent and neutral monetary policy.

The PBOC would "provide reasonably ample liquidity to the growth of monetary credit and social financing scale", it said.

The RRR cut would not create depreciation on the yuan, the PBOC said, adding it would keep the foreign exchange markets stable.

SOFTENING FOCUS ON CUTTING DEBT

With China's economy and the full impact of U.S. trade tariffs still to be felt, policymakers are shifting their priorities to reducing risks to growth, with the yuan and stock markets under pressure.

China's economic growth rate slows slightly to 6.7 percent in the second quarter year-on-year, still well above the government's full-year target of around 6.5 percent. But some key activity indicators have weakened more sharply.

Fixed-asset investment is growing at the slowest pace on record, while non-performing loans are growing in the second quarter and defaults climbed. The July Nationwide Jobless Rose Rate is 5.1 percent.

Smaller companies, in particular, are having a tough time in debt consolidation.

The weighted average lending rate for non-financial firms, which reflects corporate financing costs, is based on a total of 5.97 percent, following a rise of 22 basis points in the first quarter and 47 basis points in 2017.

China's banking regulator has asked banks to provide a lower rate of funding for smaller firms and raise their tolerance for non-performing ratios for loans to small and micro firms.

China's politburo and state council have also been replaced by "deleveraging" with "structural deleveraging," a change that suggests less harsh curbs on debt.

"Liquidity is flush in the banking system. "The key question is how to channel cash to the real economy," said Zhang Yiping, senior economist at Merchants Securities in Shenzhen.

"The external environment is getting tougher and we can not rule out more RRR cuts," Zhang said.