China Injects Record $83 Billion to Counter Economic Decline

China’s economy is facing some of its toughest challenges in years. On Wednesday, a day after several Chinese government institutions vowed further stimulus to aid its financial sector, the People’s Bank Of China injected a net $83 billion (560 billion yuan) into open market operations via reverse repo operations — to counter its declining economy.

In an official statement, China’s central bank states:

At present, it is the peak of the tax period, and the banking system’s overall liquidity is falling rapidly.

Unfortunately, the injection has failed to impact the Chinese stocks and money market rates as they closed on Wednesday with little to no change.

China Must Prepare for Economic Difficulties?

While injections are not unusual for this time of the year, this one is significantly heftier than the typical ones and comes after an announced large cut in banks’ reserve ratios. The reduction is expected to free up a total of $116 billion for new bank lending. Chinese authorities have reportedly urged financial institutions to keep supporting struggling firms and even dangled incentives, while banks are concerned over delinquencies after a long regulatory crackdown on risky lending.

“The news is clear—the economy needs help,” Trinh Nguyen, a Natixis economist, told Reuters.

Moreover, according to the same news outlet, a state radio on Wednesday quoted the country’s Premier, Li Keqiang, saying that China must prepare for economic difficulties in 2019 as its financial sector faces increasing pressure.

According to another publication in South China Morning Post, eight of the 12 provinces in China that have reported growth targets for 2019 have updated them downwards. All targets are either the same or lesser than the ones for 2018:

Provincial Growth Targets for 2018 and 2019 | Source: South China Morning Post

These moves,

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CCN

January 17, 2019