The People’s Bank of China has been most innovative in its stimulation measures.
The central bank of China has brought down borrowing costs, through lower interest rates to improve the Chinese economy.
The slowing Chinese economy is in dire need of fiscal stimulus, especially as the trade talks are still extending and may even intensify in the days to come.
PBOC makes use of multiple methods to control interest rates and flow of money within its economy. The Loan Prime Rate (LPR) is one such important monetary policy tool that has been used.
The LPR is now replacing the bank’s benchmark instead of the one-year lending rate. This is expected to benefit businesses and households. However, the lending rate has been a very tiny reduction, which shows that the central bank is not willing to lower lending rates further.
The lending rates will come down slightly through this measure feel analysts. Further, it is expected that the country needs further stimulus and the PBOC will take other steps to reduce the new reference rate.
China has been hit by high tariffs, which is dragging the growth of the economy. The GDP growth is falling and it is feared that it may even go below the crucial level of 6 percent in the year 2020.
Small businessmen are the most affected by the trade tariff. By lowering borrowing costs, it is easier for small traders to conduct business.
The International Monetary Fund has projected the growth of China to be 6.2 percent for the current year. In 2020, GDP is projected at 6.0 percent. With trade tariffs to further increase in the month of September, growth is expected to further go down in the months to come.
Liu Guoqiang, the Vice Governor of PBOC has told reporters that the Reserve Requirement Ratio and interest rates may face further cuts in the near future.
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