China reduces key interest rate to 1.4%

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China said it will reduce its reference interest rate and reduce the amount of money that banks must have as reserves, offering the economy support in the face of a trade war with the United States.

China will drop the proportion of reserve requirements for the banks by 0.5 percentage points and will reduce various key interest rates to release RMB1TN ($ 138 million) long -term liquidity in the banking system, according to Pan Gongsheng, governor of the Popular Bank of China.

PAN, speaking at a Wednesday press conference along with officials of two other financial regulatory agencies, said that the Central Bank would reduce the replacement rate of seven days of reference by 0.1 percentage points to 1.4 percent and reduce deposits and other interest rates to refinance loans.

Beijing deployed measures in the midst of a forceful trade war with the United States, which begins to achieve the vast sector of the country’s manufacture, with many canceled export orders and factories that begin to work on workers and reduce production.

Beijing and Washington said on Wednesday that they would have their first commercial conversations since the President of the United States, Donald Trump, launched a trade war against China, as both parties are looking for a ramp to reduce punishment rates.

The trade war is coming when China is already fighting weak domestic demand, forcing Beijing to successive waves of monetary policy since last year.

Pan said that the latest measures were due to “uncertainty of the global economy, economic fragmentation and commercial tensions, which altered world industrial supply chains”.

Reducing the Bank Reserve Requirements Relationships means that the average weighted throughout the sector would fall to 6.2 percent of 6.6 percent, Pan said.

The PBOC will also reduce the percentage of reservation requirements for financial lease companies and funding of vehicles to zero of 5 percent, a movement that would release capital and improve its loan capacity.

The cost of taking away a government-led program for housing purchases would be reduced by 0.25 percentage points to 2.6 percent, Pan said, to “support the rigid housing needs of residents and to help the real estate market to stabilize”.

Li Yunze, director of the National Financial Regulatory Administration, the financial sector watchman, said that China will deploy new measures to support exporters “with the aim of stabilizing its operations and helping them to expand their markets”.

He added that China would also have new financing mechanisms to support the real estate sector in trouble and expand a pilot program to allow more insurance companies funding to go out.

“We are fully taking advantage of the advantages of insurance funds as a patient, long -term capital and we will allow it to enter and stabilize the market with greater force,” said Li.

The Hong Seng Hong Kong index advanced 2.2 percent just after the opening, while the CSI 300 Index of continental China increased by 0.7 percent. Offshore Renminbi, which is freely quoted, weakened 0.1 percent to RMB7.21 per dollar.

Wenjie Ding’s additional reports to Beijing