Beijing, China – China’s main bank is taking steps to protect its large economy from the impact of tough new taxes from the United States. They are using one of their tools to put more money into the system.
The People’s Bank of China (PBOC) said on Thursday that on Friday, they will use a special one-year loan program to add 600 billion yuan (about $82.3 billion) to the banks. This is to make sure banks have enough money. Experts at Bloomberg say that this action will mean a total of 500 billion yuan more in cash through this method in April. This is the most money added in this way since December 2023.
Wang Qing, a top expert at Golden Credit Rating, said that this move shows that the central bank wants to help the economy as it faces problems with trade. He also pointed out that this will help make sure there is enough money when the government starts selling special bonds to get more funds.
People who invest money have been asking the PBOC to make it easier to borrow because the economy is facing trouble from US taxes that could be as high as 145 percent. This new boost of money can help handle the increased need for cash during the holidays in early May. It will also help the government sell special bonds, which started this week.
The PBOC recently changed how they set the price for this one-year loan program. Now, banks can offer different prices to borrow. The central bank has also stopped telling people how much these loans cost. This is part of a bigger change in how they manage interest rates, focusing more on rates for short-term loans. Their goal is to have a somewhat relaxed money policy to help the economy grow.
The decision to put more cash in through this one-year loan program was a bit of a surprise. For months, the central bank had been talking less about this tool. Instead, they had been using shorter borrowing deals that last for three or six months to replace some of the loans that were ending.
This month, a lot of these short borrowing deals, worth 1.7 trillion yuan, are ending. This is the biggest amount in a single month since the PBOC started using this tool. The central bank is expected to announce its plans for this tool for April at the end of the month.
Ming Ming, a chief economist at Citic Securities, thinks that putting more money in through the one-year loan program could help balance out the pressure from these short borrowing deals ending this month.
He also suggested that this might mean the central bank doesn’t need to lower the amount of money banks have to keep in reserve as quickly. He added that even though this one-year loan program has become less important in their overall plans, it is still a useful way for the PBOC to put money into the system for a longer time.
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