China Implements Monetary Stimulus to Combat Deflation and Spur Growth

China's central bank introduced monetary stimulus and property market support in response to deflationary pressures and sluggish economic growth. Measures include lowering reserve requirement ratios and interest rates. Governor Pan Gongsheng announced these in a press conference. The initiatives aim to meet the country's 2024 growth target of 5.0%.

China's central bank has announced comprehensive monetary stimulus and property market support measures to revive an economy struggling with strong deflationary pressures, risking missing its growth target for the year. Governor Pan Gongsheng disclosed these adjustments at a news briefing alongside officials from other financial regulatory agencies.

The central bank plans to reduce the reserve requirement ratios (RRR) by 50 basis points, effectively cutting the amount of cash banks must hold in reserve. Additionally, the People's Bank of China will lower the seven-day repo rate by 0.2 percentage points to 1.5%. Interest rates on deposits and other instruments will also fall, with existing mortgage rates decreasing by an average of 0.5 percentage points. Pan did not specify the timeline for these measures to take effect.

China's economy grew far slower than anticipated in the second quarter, impacted by an enduring property crisis and consumer uncertainties surrounding job security. August's economic data underperformed, intensifying the urgency for further policy support. The government aims for an economic growth rate of around 5.0% for 2024, but several investment banks have downgraded their growth forecasts. In response to these measures, stocks have risen, and the onshore yuan has strengthened.

(With inputs from agencies.)