January 1, 2021 at 6:26 ET
BEIJING – Chinese officials have begun the new year – one of which is expected to present new challenges for the world’s second-largest economy – signaling a penchant for easier money.
The People’s Bank of China said on Wednesday it would cut half the percentage of deposits that commercial banks must reserve as reserves by half a percentage point, a measure that essentially releases 800 billion yuan ($ 115 billion) to the financial system. .
The long-awaited decision, which will take effect on Monday, comes as liquidity conditions are expected to be adjusted before the lunar New Year celebrations, which fall in late January this year, Liu said Xuezhi, economist at Shanghai Communications Bank.
By releasing bank liquidity on the first day of 2021, the Chinese central bank “sends a clear message that the political stance will not be adjusted this year,” Liu said.
The challenges of the next decade will expand Beijing’s policy-making capabilities. As trade barriers increase around the world, authorities can no longer count on the kind of foreign investment or exports that have kept the country growing rapidly for so long. They say the answer is a more efficient, country-centric economy, while reducing debt.