China slashes banks’ reserve requirements as trade war imperils growth

China slashes banks’ reserve requirements as trade war imperils growth

Sunday’s move will inject a net 750 billion yuan ($109.2 billion) in cash into the banking system by releasing a total of 1.2 trillion yuan in liquidity, with 450 billion yuan of that to offset maturing medium-term lending facility (MLF) loans.

The RRR cut, announced on the last day of China’s week-long National Day holiday, indicates that the central bank is worried about the impact of “external shocks” to markets such as a speech last week by U.S. Vice President Mike Pence, said Zhang 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 toward China, going beyond the bitter trade war between the world’s two biggest economies, which has magnified concerns about the outlook for China’s economy.

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