: As China’s pillars of growth wobble, it is rethinking its whole economy #IndiaNEWS The People’s Bank of China is encouraging Chinese banks to lend more to businesses and consumers by cutting the

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As China’s pillars of growth wobble, it is rethinking its whole economy #IndiaNEWS
The People’s Bank of China is encouraging Chinese banks to lend more to businesses and consumers by cutting the proportion of deposits that they have to hold as reserves by 0.5 percentage points to an average of 8.4% from December 15.It follows a similar cut in July, and is an interesting counterpoint to western central banks such as the Bank of England and Federal Reserve. They are talking about tightening monetary conditions to dampen inflation by raising interest rates and reducing quantitative easing, which effectively creates more money to stimulate lending.So why are the Chinese loosening and what effect will it have?The official reasoning is to ease credit conditions in the face of a slowing property sector and a disappointing annual GDP growth rate of 4.9% in the third quarter, down from 7.9% in the second quarter. The cut in the bank reserves minimum, which is known as the required reserve ratio, is expected to release ¥1.2 trillion of extra money into the economy.China’s growth headacheThis aims to bolster demand within China so that the modest government growth target of 6% in 2021 will be met. It could achieve that short-term goal by stimulating demand if credit expands and gets to the right places. And, unlike the West, inflation is less of a...Read more

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