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China injects 70 billion euros to support its economy

By reducing the funds they are forced to keep with it, the Chinese central bank is allowing commercial banks to lend more to businesses.

Through Le Figaro with AFP

The coronavirus launched an even more serious challenge to the Chinese economy, practically paralyzed in February by the anti-epidemic measures taken by Beijing.
The coronavirus launched an even more serious challenge to the Chinese economy, practically paralyzed in February by the anti-epidemic measures taken by Beijing. THOMAS PETER / REUTERS

The Chinese central bank announced Friday a drop in the reserve ratio of banks, freeing up 550 billion yuan (70.6 billion euros) to support the economy.

This ratio, which obliges the banks to preserve liquidities near the central bank, will be lowered in a proportion of a half point to a percentage point as from Monday, specified in a press release the institute of emission, at a time when China is facing a strong economic slowdown due to the Covid-19 epidemic.

By reducing the funds they are forced to keep with it, the central bank allows commercial banks to lend more to businesses to support the real economy. The last decline dates back to January 6. Beijing had then reduced the reserve requirement rate by half a point, injecting around 100 billion euros into the economy.

While the Chinese economy suffered the aftermath of Donald Trump’s American-led trade war last year, the central bank had already cut the rate three times. But the coronavirus launched an even more serious challenge to the Chinese economy, practically paralyzed in February by the anti-epidemic measures taken by Beijing.

Witness to the halt, manufacturing activity collapsed last month at a level never reached, according to the official index of purchasing managers published in late February: the latter fell to 35.7 against 50 in January .

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