China has moved to prop up the yuan by increasing the supply of foreign currency in its domestic market, part of a multi-pronged effort by the Beijing administration to restore confidence amid slowing growth.
The People’s Bank of China (the country’s central bank) said that financial institutions will have to keep only 4% of their foreign currency reserves, compared to the current level of 6%, and the decision takes effect from September 15.
The move contributes to increasing the availability of foreign currencies compared to the local currency, which effectively enhances the attractiveness of the yuan.
The move also came on the heels of lower mortgage down payments, aimed at helping the country’s battered residential real estate market, and monetary policymakers cut stamp duty on stock trading over the weekend.
The combination of supportive measures for the economy is a sign that Beijing is feeling uncomfortable about the growing pessimism in its financial markets.
A group of Chinese banks coordinatedly cut interest rates on deposits for the third time in a year, and the authorities also cut the amount of money that banks need to keep in foreign exchange reserves, with the aim of stimulating the economy and reviving the country’s faltering real estate market.
China’s central bank, the People’s Bank, said it will lower the proportion of foreign exchange reserve requirements that banks must hold as reserves, by 200 basis points to 4% from 6% starting September 15, a move aimed at slowing the pace of the yuan’s decline.
A group of Chinese banks also conducted a coordinated cut in interest rates on deposits, as banks try to support their profits in light of government policies aimed at boosting consumption and demand.
The interest cuts on deposits are the third of their kind in one year, as the size of the cuts was greater than the previous two rounds in June and September of last year.
A group of state-controlled banks participated in the coordinated rate cut decision for clients, including the Industrial and Commercial Bank of China, Bank of China and Agricultural Bank of China. Banks cut the annual interest rate on one-year deposits by 10 basis points to 1.55%, in When the interest on five-year deposits was reduced by about 25 basis points, to 2.25%.
2023-09-01 15:30:07
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