PBOC cuts reserve ratio to lower than 2008 financial crisis level to keep pooh bear’s China wet dream afloat

will this be miraculous growth stimulus like how it was in 2008? or will this be a death trap waiting for the chinese banks when the bubble actually pops

www.bloomberg.com/news/articles/2018-10-07/pboc-cuts-reserve-ratio-for-some-banks-jmyd3ly1

China’s central bank cut the amount of cash lenders must hold as reserves for the fourth time this year, as policy makers seek to shore up the faltering domestic economy amid a worsening trade war.

The People’s Bank of China lowered the required reserve ratio for some lenders by 1 percentage point, effective from Oct. 15, according to a statement on its website Sunday. The cut will release a total of 1.2 trillion yuan ($175 billion), of which 450 billion yuan is to be used to repay existing medium-term funding facilities which are maturing, the central bank said.

The central bank has shifted to looser monetary policies this year as the combined effects of Beijing’s financial clean up and the trade conflict with the U.S. threatened the economic expansion. As there’s now every sign that the Trump administration intends to continue pressing Beijing on trade and other fronts, China is faced with a more urgent need to support the domestic economy, even if that may increase downward pressure on the currency.

“The move is part of policymakers’ defensive easing package, in view of headwinds on broad credit growth and more visible activity moderation in September,” economists including Robin Xing, chief China economist at Morgan Stanley in Hong Kong wrote in a note. “To keep the economy on the path of soft landing amid persistent trade tensions, we think more easing measures are needed to foster a modest rebound in credit growth.”

AC

468 views