China will inject more than 100,000 million to stimulate its economy in the beginning of 2020

The People’s Bank of China (BPC) has started 2020 by announcing a reduction of 50 basis points of the required reserve ratio to the country’s banks, which will release liquidity in the amount of about 800,000 million yuan (102,664 million euros) and will make it cheaper the credit in the Asian giant for the Lunar New Year festivities, which is celebrated from next January 25.

The cut of 50 basic points of the banking reserve will be effective as of January 6, when the reserve ratio will become 12.50% for large banks and 10.50% for smaller lenders.

“The cut serves as a countercyclical adjustment and releases more than 800,000 million yuan in the long term, effectively increasing stable sources of financing for financial institutions to support the real economy, reducing the cost of funds,” explained the central bank Chinese in a statement.

The BPC also stressed that the measure will help commercial banks increase their services to the community, expressing their confidence that large and small banks “will make good use of the funds released” to increase their support for SMEs and the sector private.

In this regard, the Chinese central bank estimates that small and medium-sized entities will receive around 120,000 million yuan (15,394 million euros) in long-term funds, thus strengthening their ability to meet their obligations.

Despite its intervention, the Chinese issuing institute has stressed that the adjustment of the reserve coefficient does not represent “an indiscriminate stimulus measure”, arguing that the measure is “appropriate and solid” and that its position in monetary policy remains unchanged .