The Chinese central bank announced on Wednesday an upcoming reduction in the required reserve ratio of banks, a measure intended to ward off the slowdown in growth in the world’s second largest economy.
The required reserve ratio (RRR) is the share of deposits that banks are required to keep in their coffers.
This ratio will be lowered by 0.5 point, said the governor of the Central Bank, Pan Gongsheng, quoted by state media.
The measure should allow commercial banks to lend more to businesses to support the real economy.
It will be effective from February 5 and should make it possible to inject some 1,000 billion yuan (128.7 billion euros) into the economy, according to the central bank.
The last drop in the RRR, until then set at around 7.4%, was in September 2023.
This announcement on Wednesday comes after a succession of mixed indicators for the world’s second largest economy.
China recorded one of the weakest growth rates in three decades last year, according to official figures.
Despite everything, the country saw its gross domestic product (GDP) grow by 5.2% over one year in 2023, but the comparison is made with 2022 when restrictions against Covid-19 had heavily penalized activity.
Between the third and fourth quarters, a more accurate comparison of the economic situation, the pace is much more modest (+1%) for the Asian giant.
Deflation also continued in December for the third consecutive month in China, a sign of sluggish consumption and a reversal of the main economies, which are prey to inflation.
Activity is particularly penalized by uncertainties on the labor market and the global economic slowdown which is weighing on demand for Chinese goods and therefore on the activity of thousands of factories.
The situation in the real estate sector, with its share of developers on the verge of bankruptcy and unfinished housing, is also a major obstacle to growth.
This sector, with that of construction, has long contributed to a quarter of China’s GDP and constituted an important source of employment.
In December, China’s major cities again recorded a month-on-month decline in property prices, according to official figures.
The fall in the price of stone is a hard blow to the wallets of Chinese households, for whom the purchase of real estate has long been seen as a safe investment for savings.