China’s central bank has announced it will cut the ratio of reserves banks must hold to help boost the slowing economy.
The announcement by the People’s Bank of China prompted a surge in share prices in Chinese markets, with Hong Kong’s benchmark jumping 3.6%.
Chinese stock markets have languished in recent months as investors pulled money out, discouraged by a faltering recovery from the shocks of the Covid-19 pandemic.
A sell-off earlier this week was followed by unconfirmed reports that the government planned to get state-owned investment companies to funnel offshore funds into the markets to help staunch the losses.
The central bank’s moves appear to be part of a concerted effort to stabilise the markets and instil greater confidence in the outlook for the world’s second-largest economy.
Central bank governor Pan Gongsheng said the deposit reserve requirement would be cut by 0.5% as of February 5.
Mr Pan said that would inject about one trillion yuan (more than £110 billion) into the economy.
He told reporters in Beijing that the central bank also plans to issue a policy on lending to property developers to help support the industry.
China’s economy is recovering, he said, allowing ample room for policy manoeuvres.
He told a government website: “At present, our country’s financial risks are generally controllable, the overall operations of financial institutions are sound, and financial markets are operating smoothly.”
