China Boosts Economy with Policy Tools: Flexible Interest Rates and Reserve Requirement Ratios for Sustainable Growth
The ruling Communist Party of China has announced that it will increase its support for the economy, with a focus on using policy tools such as banks’ reserve requirement ratios (RRR) and interest rates. This decision was made during a meeting chaired by President Xi Jinping and was reported by state media on Tuesday.
The Politburo has noted that while the Chinese economy is showing signs of recovery and improvement, there are still many challenges ahead. These include insufficient demand, pressures on firms, risks, and hidden dangers in key areas of the economy. Despite these challenges, the Politburo highlighted that China’s economic foundation is stable, with many advantages and strong resilience.
To maintain the necessary intensity of fiscal expenditure, China plans to issue ultra-long term special treasury bonds and speed up the issuance of local government special bonds. The country will also work to reduce housing inventories, optimize policy measures for new housing, and continue reforms for small- and medium-sized financial institutions.
In order to support the real economy and reduce the overall cost of social financing, China plans to flexibly use policy tools like interest rates and reserve requirement ratios. Additionally, Beijing will take steps to promote the healthy development of the capital market and deepen the implementation of local government debt-risk resolution plans. This will help to reduce the debt burden in provinces and cities according to the Politburo.
