Chinese stocks jumped late in Asian trading on Wednesday after the country's central bank said it would soon ease monetary policy to support the faltering economy.
People's Bank of China Governor Pan Gongsheng said at a press conference that the reserve requirement ratio for banks will be reduced by 0.5 percentage points on February 5.
Gong Sheng said that reducing the required reserve ratio, which determines how much cash banks must hold in their reserves, would provide 1 trillion yuan ($139 billion) in long-term liquidity to the market.
Allowing the financial sector to lend more, by freeing up bank liquidity, has long been a tool for the People's Bank of China to boost growth, and the announcement comes as the Chinese economy struggles to fully recover since the coronavirus lockdowns.
Consumer sentiment and economic activity have been suppressed by the collapse of the debt-laden real estate sector. Political tensions between Beijing and the West, which have contributed to a decline in foreign direct investment, have added to the malaise, pushing the Shanghai Composite Stock Index close to its lowest level in five years at the start of this week.
Reports on Tuesday that Beijing was considering creating a $287 billion fund to stabilize stock markets helped benchmark indices pull away from their lows, with the Shanghai Composite Index up 0.5% and Hong Kong's Hang Seng Index (HK:HSI) up 2.6%. % of 14 months. Trough.
These gains were extended after the People's Bank of China's announcement on Wednesday, with the Shanghai Composite Index adding 1.8% and the Hang Seng Index jumping 3.6%.
