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How is the Chinese central bank supporting the country's economy in the present scenario?

John Naronha


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In a bid to aid small and medium-sized firms from gaining access to affordable financing, the Chinese central bank offered fresh medium-term loans to the country’s financial institutions on Tuesday. The People’s Bank of China (PBOC) pumped in a total of 497.7bn yuan ($72.3bn), with 200bn yuan in one year, via the medium-term lending facility (MLF) and 297.7bn yuan through the targeted medium-term lending facility (TMLF). While the infusion more or less offset the 502bn in MLF loans that were due to expire on Tuesday, the central bank maintained its liquidity supply by leaving interest rates on the MLF and TMLF unchanged at 3.3% and 3.15% respectively.

The PBOC’s move is in line with its easy policy stance which it adopted last year following the trade war with the United States. While the Chinese central bank aims to provide affordable financing to distressed small and private companies often termed as high credit-risk firms in a bid to protect jobs, it has slashed the reserve requirement ratio (RRR) of banks six times in 2018 to free up money to lend.

With the drawn-out trade war getting costlier by the day, Beijing is keeping all its policy tools open including aggressive interest rate cuts to tide over mounting debt.

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